no. 18-3325 - keller rohrback llp · no. 18-3325 united states court of appeals for the seventh...

No. 18-3325

UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

__________________________________________________

SHEILAR SMITH, et al.,

Plaintiffs-Appellants,

v.

OSF HEALTHCARE SYSTEM, et al.,

Defendants-Appellees.

__________________________________________________

Appeal from the United States District Court for the Southern District of Illinois,

No. 3:16-cv-00467-SMY-RJD The Honorable Staci M. Yandle, Presiding

__________________________________________________

PLAINTIFFS-APPELLANTS’ OPENING BRIEF AND SHORT APPENDIX

__________________________________________________

KELLER ROHRBACK L.L.P.Matthew Gerend (Lead Attorney) Lynn L. Sarko Laura R. Gerber 1201 Third Ave., Suite 3200 Seattle, WA 98101 Tel.: (206) 623-1900

Ron Kilgard 3101 N. Central Ave., Suite 1400 Phoenix, AZ 85012 Tel.: (602) 248-0088

COHEN MILSTEIN SELLERS &TOLL PLLC Karen L. Handorf Michelle C. Yau Mary Bortscheller Scott M. Lempert 1100 New York Ave., N.W. Suite 500, West Tower Washington, D.C. 20005 Tel.: (202) 408-4600

Counsel for Plaintiffs-Appellants__________________________________________________

(Additional counsel listed on inside cover)

Case: 18-3325 Document: 24 Filed: 12/10/2018 Pages: 156

KESSLER TOPAZ MELTZER &CHECK, LLP Mark K. Gyandoh 280 King of Prussia Road Radnor, PA 19087 Tel.: (610) 667-7706

IZARD, KINDALL & RAABE, LLPMark P. Kindall 29 South Main Street, Suite 305 West Hartford, CT 06107 Tel.: (860) 493-6292

Counsel for Plaintiffs-Appellants


DISCLOSURE STATEMENTS


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18-3325

Smith v. OSF Healthcare System, et al.

Sheilar Smith, Kasandra Anton, June Schwierjohn, Bonnie Bailey, and Peggy Wise, on Behalf of Themselves

and All Others Similarly Situated, and on Behalf of the OSF Plans

Mathew Gerend, Keller Rohrback L.L.P.

(see attched for additional counsel)

s/ Matthew Gerend 11/02/2018

Matthew Gerend

Keller Rohrback L.L.P.

1201 Third Avenue, Suite 3200, Seattle, Washington 98101

206-623-1900

[email protected]

N/A

N/A

206.623.3384

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18-3325




See Attached

N/A

N/A

s/ Lynn L. Sarko 12.07.2018

Lynn L. Sarko



206-623-1900 206-623-3384

[email protected]



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18-3325




See Attached

N/A

N/A

s/ Laura R. Gerber 12.06.2018

Laura R. Gerber



206-623-1900 206-623-3384

[email protected]



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18-3325




See Attached

N/A

N/A

s/ Ron Kilgard 12.06.2018

Ron Kilgard


3101 North Central Avenue, Suite 1400, Phoenix, Arizona 85012

602-248-0088 602-248-2822

[email protected]



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18-3325




See Attached

N/A

N/A


Attorneys for Plaintiffs-Appellants

KELLER ROHRBACK L.L.P. Matthew Gerend (Lead Counsel) [email protected] Lynn Lincoln Sarko [email protected] Laura R. Gerber [email protected] 1201 Third Avenue, Suite 3200 Seattle, WA 98101-3052 Tel.: (206) 623-1900

KELLER ROHRBACK L.L.P. Ron Kilgard [email protected] 3101 North Central Avenue, Suite 1400 Phoenix, AZ 85012 Tel.: (602) 248-0088

COHEN MILSTEIN SELLERS & TOLL, PLLC Karen L. Handorf [email protected] Michelle Yau [email protected] Mary J. Bortscheller, ARDC #6304457 [email protected] Scott Lempert [email protected] 1100 New York Avenue, N.W. Suite 500, West Tower Washington, DC 20005 Tel: (202) 408-4600

ARMSTRONG LAW FIRM LLC Matthew H. Armstrong, ARDC #6226591 [email protected] 8816 Manchester Road, No. 109 St. Louis, MO 63144 Tel: (314) 258-0212


KESSLER TOPAZ MELTZER & CHECK, LLP Mark K. Gyandoh [email protected] 280 King of Prussia Road Radnor, PA 19087 Tel: (610) 667-7706

IZARD, KINDALL & RAABE, LLP Mark P. Kindall [email protected] 29 South Main Street, Suite 305 West Hartford, CT 06107 Tel: (860) 493-6292


i

TABLE OF CONTENTS

STATEMENT CONCERNING ORAL ARGUMENT ............................ xii

JURISDICTIONAL STATEMENT ........................................................... 1

I. District Court’s Jurisdiction ................................................... 1

II. Appellate Court Jurisdiction .................................................. 1

STATEMENT OF ISSUES PRESENTED FOR REVIEW ...................... 2

STATEMENT OF THE CASE .................................................................. 3

I. Statutory Background ............................................................ 3

A. ERISA’s Pension Safeguards ........................................ 3

B. The Church Plan Exemption ........................................ 6

C. Informal Internal Revenue Service Opinions ............ 10

D. The Supreme Court’s Advocate Decision ................... 12

II. Factual Background .............................................................. 13

III. Procedural History ................................................................ 17

SUMMARY OF ARGUMENT ................................................................. 21

STANDARD OF REVIEW ....................................................................... 25

ARGUMENT ............................................................................................ 26

I. The Plans Are Not Church Plans Because They Are Not Maintained by a Permissible Entity. .................... 26

A. Only Two Types of Entities May Maintain a Church Plan. ................................................................ 26

B. OSF Maintains the Plans. ........................................... 29


ii

C. OSF Is Neither a Church nor a Principal-Purpose Organization. ................................................. 33

D. The Committees Do Not Maintain the Plans. ............................................................................ 35

1. The District Court Applied an Erroneous, Acontextual Definition of “Maintained.” ...................................................... 36

2. The District Court Failed to Evaluate Which Entity Had the “Primary” Responsibility. .................................................... 44

3. The District Court Ignored Genuine Factual Disputes Regarding Who Administers the Plans........................................ 46

E. Even If the Committees “Maintained” the Plans, They Are Not Principal-Purpose “Organization[s].” ........................................................ 48

F. The Informal Position of the IRS and Department of Labor Is Neither Controlling nor Persuasive.............................................................. 52

II. The District Court Abused Its Discretion by Denying Plaintiffs’ Rule 56(d) Request. .............................. 55

III. Application of the Church Plan Exemption Is Unconstitutional. .................................................................. 57

A. Religious “Accommodations” Must Eliminate Government Entanglement in Religion or Relieve a Substantial Religious Burden. ......................................................................... 59

B. Application of the Church Plan Exemption Does Not Eliminate Government


iii

Entanglement in Religion or Alleviate a Substantial Religious Burden. .................................... 64

1. ERISA Does Not Burden or Cause Entanglement in Religion. ................................. 64

2. Application of the Exemption Does Not Comport with Congress’s Stated Purpose. ............................................................... 66

3. The District Court Mistakenly Relied on Amos and Other Valid Religious Accommodations. ................................................ 69

C. A Religious Accommodation Must Be Measured to Avoid Burdening Nonbeneficiaries. ......................................................... 71

CONCLUSION ......................................................................................... 73


iv

TABLE OF AUTHORITIES

CASES

Advocate Health Care Network v. Stapleton, 137 S. Ct. 1652 (2017) .............................................................................. passim

Anderson v. UNUM Provident Corp., 369 F.3d 1257 (11th Cir. 2004) ............................................................ 30, 31, 39

Bankers Life & Cas. Co. v. United States, 142 F.3d 973 (7th Cir. 1998) ............................................................................ 53

Bennett v. Spear, 520 U.S. 154 (1997) ......................................................................................... 50

Bowen v. Kendrick, 487 U.S. 589 (1988) ......................................................................................... 67

Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014) ............................................................................... 66, 72

Butler v. Holy Cross Hosp., No. 16-5907 (N.D. Ill.) .................................................................................... 12

Charles v. Verhagen, 348 F.3d 601 (7th Cir. 2003) ............................................................................ 62

Christensen v. Harris Cty., 529 U.S. 576 (2000) ................................................................................... 52, 53

Comm. for Pub. Educ. & Religious Liberty v. Nyquist, 413 U.S. 756 (1973) ................................................................................... 64, 69

In re Consol. Litig. Concerning Int’l Harvester’s Disposition of Wis. Steel, 681 F. Supp. 512 (N.D. Ill. 1988) ..................................................................... 40

Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Amos, 483 U.S. 327 (1987) ....................................................................... 60, 61, 62, 69


v

Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992) ......................................................................................... 40

Cutter v. Wilkinson, 544 U.S. 709 (2005) .................................................................................. passim

Diak v. Dwyer, Costello & Knox, P.C., 33 F.3d 809 (7th Cir. 1994) .............................................................................. 29

Digrugilliers v. Consol. City of Indianapolis, 506 F.3d 612 (7th Cir. 2007) ...................................................................... 61, 63

Doe ex rel. Doe v. Elmbrook Sch. Dist., 687 F.3d 840 (7th Cir. 2012) ................................................................ 59, 60, 68

Dolan v. U.S. Postal Serv., 546 U.S. 481 (2006) ......................................................................................... 37

Easley v. Kirmsee, 382 F.3d 693 (7th Cir. 2004) ............................................................................ 57

In re Estate of Muppavarapu, 836 N.E.2d 74 (Ill. App. Ct. 2005) ................................................................... 66

Evans v. City of Chicago, 689 F.2d 1286 (7th Cir. 1982) .......................................................................... 58

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) ......................................................................................... 43

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987)................................................................................. 29, 31, 39

Freedom From Religion Found., Inc. v. Concord Cmty. Sch., 885 F.3d 1038 (7th Cir. 2018) .......................................................................... 59

Golden Gate Rest. Ass’n v. City & Cty. of S.F., 546 F.3d 639 (9th Cir. 2008) ...................................................................... 31, 39

Bd. of Educ. v. Grumet, 512 U.S. 687 (1994) ......................................................................................... 60


vi

Hanshaw v. Life Ins. Co. of N. Am., 2014 WL 5439253 (W.D. Ky. Oct. 24, 2014) .................................................. 34

Hibbs v. Winn, 542 U.S. 88 (2004) ..................................................................................... 37, 50

Hightower v. Tex. Hosp. Ass’n, 65 F.3d 443 (5th Cir. 1995) ........................................................................ 32, 39

Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999) ......................................................................................... 39

Jimmy Swaggart Ministries v. Bd. of Equalization, 493 U.S. 378 (1990) ................................................................................... 64, 65

John Hancock Mut. Life Ins. Co. v. Harris Tr. & Sav. Bank, 510 U.S. 86 (1993) ........................................................................................... 51

United States v. Lee, 455 U.S. 252 (1982) ......................................................................................... 72

Lemon v. Kurtzman, 403 U.S. 602 (1971) ......................................................................................... 59

Lockheed Corp. v. Spink, 517 U.S. 882 (1996) ................................................................................. 4, 5, 39

Loughrin v. United States, 134 S. Ct. 2384 (2014) ............................................................................... 27, 50

Lynch v. Donnelly, 465 U.S. 668 (1984) ......................................................................................... 59

McCreary Cty. v. ACLU of Ky., 545 U.S. 844 (2005) ................................................................................... 60, 67

United States v. Mead Corp., 533 U.S. 218 (2001) ......................................................................................... 52

Medina v. Catholic Health Initiatives, 877 F.3d 1213 (10th Cir. 2017) ................................................................. passim


vii

Mercier v. Fraternal Order of Eagles, 395 F.3d 693 (7th Cir. 2005) ............................................................................ 70

Milwaukee Deputy Sheriffs’ Ass’n v. Clarke, 588 F.3d 523 (7th Cir. 2009) ............................................................................ 68

Oconomowoc Residential Programs v. City of Milwaukee, 300 F.3d 775 (7th Cir. 2002) ............................................................................ 25

Owens v. St. Anthony Med. Ctr., No. 14-4068 (N.D. Ill.) .................................................................................... 12

United States v. Patel, 778 F.3d 607 (7th Cir. 2015) ............................................................................ 25

Rollins v. Dignity Health, --- F. Supp. 3d. ----, 2018 WL 4262334 (N.D. Cal. Sept. 6, 2018) ............ passim

Rose v. Long Island R.R. Pension Plan, 828 F.2d 910 (2d Cir. 1987) ......................................................................... 5, 41

Santa Fe Indep. Sch. Dist. v. Doe, 530 U.S. 290 (2000) ......................................................................................... 68

Sanzone v. Mercy Health, 326 F. Supp. 3d 795 (E.D. Mo. 2018) ............................................ 36, 37, 44, 50

Sipma v. Mass. Cas. Ins. Co., 256 F.3d 1006 (10th Cir. 2001) ........................................................................ 35

Skidmore v. Swift & Co., 323 U.S. 134 (1944) ......................................................................................... 53

Stalp v. Excellus Health Plan, Inc., 2012 WL 3637257 (D. Neb. Aug. 22, 2012) .................................................... 40

Stapleton v. Advocate Health Care Network & Subsidiaries, No. 14-1873 (N.D. Ill.) .................................................................................... 13

Stapleton v. Advocate Health Care Network, 817 F.3d 517 (7th Cir. 2016) ..................................................................... passim


viii

Sterk v. Redbox Automated Retail, LLC, 770 F.3d 618 (7th Cir. 2014) ............................................................................ 25

Texas Monthly, Inc. v. Bullock, 489 U.S. 1 (1989)........................................................................... 62, 63, 69, 71

Thorkelson v. Publishing House of Evangelical Lutheran Church in America, 764 F. Supp. 2d 1119 (D. Minn. 2011) ....................................................... 51, 52

Estate of Thornton v. Caldor, Inc., 472 U.S. 703 (1985) ................................................................................... 71, 73

Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290 (1985) ......................................................................................... 64

Varity Corp. v. Howe, 516 U.S. 489 (1996) ................................................................................... 39, 43

Wallace v. Jaffree, 472 U.S. 38 (1985) ........................................................................................... 62

Walz v. Tax Commission, 397 U.S. 664 (1970) ......................................................................................... 69

White v. Regester, 422 U.S. 935 (1975) ......................................................................................... 58

Whitman v. Am. Trucking Ass’n, 531 U.S. 457 (2001) ......................................................................................... 51

STATUTES

26 U.S.C. § 6110(k)(3) ......................................................................................... 53

28 U.S.C. § 1291..................................................................................................... 1

28 U.S.C. § 1331..................................................................................................... 1

29 U.S.C. § 1001(a) ................................................................................................ 4

29 U.S.C. § 1002(1) .............................................................................................. 38

29 U.S.C. § 1002(2) .............................................................................................. 38


ix

29 U.S.C. § 1002(16) ................................................................................ 29, 37, 38

29 U.S.C. § 1002(21) ............................................................................................ 38

29 U.S.C. § 1002(33) ..................................................................................... passim

29 U.S.C. § 1003..................................................................................................... 5

29 U.S.C. § 1021..................................................................................................... 4

29 U.S.C. § 1022..................................................................................................... 4

29 U.S.C. § 1023..................................................................................................... 4

29 U.S.C. § 1024..................................................................................................... 4

29 U.S.C. § 1025..................................................................................................... 4

29 U.S.C. § 1026..................................................................................................... 4

29 U.S.C. § 1053..................................................................................................... 4

29 U.S.C. § 1083................................................................................................. 4, 5

29 U.S.C. § 1104..................................................................................................... 4

29 U.S.C. § 1105..................................................................................................... 4

29 U.S.C. § 1106..................................................................................................... 4

29 U.S.C. § 1109..................................................................................................... 4

29 U.S.C. § 1132(a)(3) .......................................................................................... 46

29 U.S.C. § 1132(e)(1) ............................................................................................ 1

29 U.S.C. § 1307..................................................................................................... 4

29 U.S.C. § 1321(b)(3) ........................................................................................... 5

29 U.S.C. § 1322..................................................................................................... 4

29 U.S.C. § 1362..................................................................................................... 5

42 U.S.C. § 12113(d) ............................................................................................ 70


x

CONSTITUTIONAL PROVISIONS

U.S. Const. Amend. I ..................................................................................... passim

RULES

Fed. R. Civ. P. 56(a) ............................................................................................. 25

Fed. R. Civ. P. 56(d) ...................................................................................... passim

LEGISLATIVE HISTORY

124 Cong. Rec. 10,464 (1978) ................................................................................ 9

124 Cong. Rec. 11,103 (1978) ................................................................................ 9

124 Cong. Rec. 12,106-07 (1978) ..................................................................... 8, 67

125 Cong. Rec. 1,356 (1979) .................................................................................. 9

125 Cong. Rec. 10,052 (1979) ................................................................ 7, 8, 28, 67

126 Cong. Rec. 23,049 (1980) ................................................................................ 9

Hearings Before the Subcomm. on Private Pension Plans & Emp. Fringe Benefits of the Comm. on Fin., 96th ...................................................... 28

S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.A.N. 4838 (1973) .................... 4, 51

S. Rep. No. 93-383, reprinted in 1974 U.S.C.C.A.N. 4889 (1973) ................ 4, 6, 66

Stenographic Transcript of Hearings Before the Comm. on Fin., U.S. S., Exec. Sess., 96th .......................................................................................... 10

OTHER AUTHORITIES

29 C.F.R. § 2509.2015-01 (2015) ......................................................................... 65

41 Fed. Reg. 36,281 (Aug. 27, 1976) .................................................................... 53

Claire Hughes, Retirees of Former Schenectady Hospital Face Pension Loss, Times Union (Jan. 29, 2017) ..................................................... 12

DOL Field Assistance Bulletin No. 2018-01 (Apr. 23, 2018) ................................ 65


xi

DOL Op. Ltr. 86-19A, 1986 WL 38856, at *1 (Aug. 22, 1986) ............................ 54

Ellen E. Schultz, IRS Nears Action on Church Pensions, Wall St. J. (June 5, 2010) .................................................................................................. 11

IRS Gen. Couns. Mem. 39,007, 1983 WL 197946 (Nov. 2, 1982) ............ 10, 11, 53

IRS Priv. Ltr. Rul. 83-15-054, 1983 WL 198031 (Jan. 13, 1983) .................... 11, 53

IRS Priv. Ltr. Rul. 86-12-068, 1985 WL 297663 (Dec. 26, 1985) ......................... 53

IRS Priv. Ltr. Rul. 2014-21-031, 2014 WL 2136100 (May 23, 2014) ................... 53

John H. Langbein et al., Pension and Employee Benefit Law (5th ed. 2010) ................................................................................................................. 4

Letting Pensions Go Broke, NJ.com (Nov. 28, 2016) ............................................ 12

Rev. Proc. 2011-44, 2011 WL 4389043 (Sept. 22, 2011) ...................................... 11

Rev. Proc. 2018-1, 2018 WL 253644 (Jan. 2, 2018).............................................. 54


xii

STATEMENT CONCERNING ORAL ARGUMENT

Plaintiffs-Appellants (“Plaintiffs”) respectfully submit that this

case is appropriate for oral argument. This is one of several cases

currently pending in federal courts involving an important issue of

federal pension law: the scope of the statutory definition of a “church

plan.”1 Church plans are exempt from the otherwise comprehensive

federal regulation of pension plans, as set out in the Employee

Retirement Income Security Act of 1974 (“ERISA”).

This Court previously considered a threshold question regarding

the church plan definition: whether every church plan must be

“established” by a church. See Stapleton v. Advocate Health Care

Network, 817 F.3d 517 (7th Cir. 2016). The Supreme Court

subsequently granted certiorari and concluded that church plans need

not be “established” by a church so long as they are “maintained” by a

permissible entity. Advocate Health Care Network v. Stapleton, 137 S.

Ct. 1652 (2017).

1 See, e.g., Kaplan v. Saint Peter’s Healthcare Sys., No. 13-2941 (D.N.J.); Rollins v. Dignity Health, No. 13-1450 (N.D. Cal.); Cappello v. Franciscan All., Inc., No. 16-290 (N.D. Ind.); Sanzone v. Mercy Health, No. 16-923 (E.D. Mo.), appeal docketed, No. 18-3574 (8th Cir. 2018).


xiii

This appeal concerns two issues left unresolved by Advocate:

which entities may maintain church plans and whether application of

the church plan exemption to religious hospital systems, but not secular

hospital systems, violates the Establishment Clause.

These questions are of critical importance to the current and

former employees of OSF HealthCare System (“OSF”) and other

hospitals claiming to sponsor church plans, as these employees have

been deprived of critical ERISA protections for their pensions.

Plaintiffs believe that oral argument could assist the Court in resolving

these issues.


1

JURISDICTIONAL STATEMENT

I. District Court Jurisdiction

The district court had subject matter jurisdiction pursuant to

28 U.S.C. § 1331 because the case is a civil action arising under the

laws of the United States, including under the Employee Retirement

Income Security Act of 1974 (“ERISA”) and the Establishment Clause of

the First Amendment of the United States Constitution. The district

court further had jurisdiction pursuant to 29 U.S.C. § 1132(e)(1), which

provides for federal jurisdiction of actions brought under Title I of

ERISA.

II. Appellate Court Jurisdiction

This Court has jurisdiction pursuant to 28 U.S.C. § 1291. This

appeal is taken from the final decision and judgment of the district

court entered on September 28, 2018, by the Honorable Staci M.

Yandle, which granted summary judgment in favor of Defendants-

Appellees (“Defendants”) and disposed of all parties’ claims. Short

Appendix (“SA”) at 1-18. Plaintiffs-Appellants (“Plaintiffs”) timely filed

their Notice of Appeal on October 26, 2018. Plaintiffs’ Appendix (“A”) at

968-71.


2

STATEMENT OF ISSUES PRESENTED FOR REVIEW

1. In concluding that the pension plans sponsored by

Defendant OSF HealthCare System (“OSF”) qualified for the statutory

“church plan” exemption from ERISA coverage, did the district court

misconstrue the meaning of the statutory term “maintained”?

2. Did the district court err in concluding there were no

genuine disputes of material fact regarding whether the pension plans

sponsored by OSF were “maintained,” not by OSF, but instead by OSF’s

internal benefit committees?

3. Did the district court err in concluding that OSF’s internal

benefit committees qualify as “organizations” that may maintain a

church plan?

4. Did the district court abuse its discretion in denying

Plaintiffs’ Rule 56(d) request to defer Defendants’ premature motion for

summary judgment?

5. Did the district court err in concluding that application of

the church plan exemption is permissible under the Establishment

Clause?


3

STATEMENT OF THE CASE

This appeal concerns whether OSF, a multi-billion-dollar hospital

system, can claim a narrow exemption from ERISA that Congress

provided for “church plans.” Plaintiffs Sheilar Smith, Kasandra Anton,

Bonnie Bailey, Peggy Wise, and June Schwierjohn filed a class action

against OSF and the fiduciaries of two pension plans that cover the

employees of OSF and its affiliates: The Sisters of the Third Order of St.

Francis Employees Pension Plan (the “OSF Plan”) and the Retirement

Plan for Employees of Saint Anthony’s Health Center (the “SAHC

Plan”) (collectively, the “Plans”). Plaintiffs, who are participants in the

Plans, seek a declaration that the Plans are not exempt from ERISA

and seek injunctive and other relief requiring Defendants to fund,

insure, and otherwise operate the Plans in accordance with ERISA.

A129-44.

I. Statutory Background

A. ERISA’s Pension Safeguards

Congress enacted ERISA following several highly publicized

failures of private pension plans, recognizing that existing state and

common law protections were insufficient to protect employee


4

retirement security.2 Prior to ERISA’s passage, many employers made

illusory pension promises. Although they promised employees would

receive defined benefit pensions upon retirement, many employers

made inadequate or delayed contributions to their pension plans and

then denied responsibility to pay promised benefits from corporate

assets when plans fell on hard times. See supra note 2.

Congress sought “to ensure that employees will not be left empty-

handed once employers have guaranteed them certain benefits.”

Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996). This was

accomplished through several key ERISA safeguards, including

minimum funding and vesting requirements, insurance of plan benefits

through the Pension Benefit Guaranty Corporation (“PBGC”), and rules

concerning reporting, disclosures, and fiduciary responsibilities. E.g.,

29 U.S.C. §§ 1083, 1053, 1021-1026, 1104-1106, 1109, 1307, 1322.

2 See, e.g., 29 U.S.C. § 1001(a) (noting “the lack of employee information and adequate safeguards,” the “inadequacy of current minimum standards,” and the “depriv[ation] of anticipated benefits” due to “the termination of plans before requisite funds have been accumulated.”); S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.A.N. 4838, 4844-47 (1973); S. Rep. No. 93-383, reprinted in 1974 U.S.C.C.A.N. 4889, 4891-903 (1973); see also John H. Langbein et al., Pension and Employee Benefit Law 78-83 (5th ed. 2010).


5

Critically, with respect to defined benefit pension plans, Congress

required employers to make ongoing contributions into trusts in

amounts sufficient to fund current and future benefit obligations. See

id. § 1083. Congress also prohibited employers from limiting their

liability for unfunded benefits. See id. § 1362. These requirements

sought to “[t]o increase the chances that employers will be able to honor

their benefits commitments[.]” Lockheed Corp., 517 U.S. at 887.

The scope of ERISA’s reach is broad; it covers both for-profit and

non-profit employers. E.g., 29 U.S.C. § 1003. Congress exempted only

two general categories of plans. One exemption is for governmental

plans: i.e., plans sponsored by federal, state, and local governmental

entities. Id. § 1003(b)(1).3 The other exemption—the sole general

exemption for plans sponsored by private employers—is for “church

plan[s].” Id. § 1003(b)(2) (exemption from Title I of ERISA); id. §

1321(b)(3) (exemption from Title IV of ERISA).

3 Congress exempted governmental plans based, in part, on federalism concerns and its recognition that “‘the ability of the governmental entities to fulfill their obligations to employees through their taxing powers’ was an adequate substitute for both minimum funding standards and plan termination insurance.” Rose v. Long Island R.R. Pension Plan, 828 F.2d 910, 914 (2d Cir. 1987) (citations omitted).


6

B. The Church Plan Exemption

Congress exempted church plans to avoid “examinations of books

and records” that “might be regarded as an unjustified invasion of the

confidential relationship … with regard to churches and their religious

activities.” S. Rep. No. 93-383, 1974 U.S.C.C.A.N. at 4965. When

ERISA was enacted in 1974, the statute defined a church plan as “a

plan established and maintained for its employees by a church or by a

convention or association of churches.” 29 U.S.C. § 1002(33)(A)(i) (1974)

(Plaintiffs’ Addendum (“ADD”) at 1) (As used herein, “church” includes

“a convention or association of churches.”).

At the time of ERISA’s enactment, some plans established and

maintained by churches covered both church employees and employees

of church-associated agencies. To ensure that these pre-existing plans

were exempted from ERISA, the original statute provided that “a plan

in existence on January 1, 1974, shall be treated as a ‘church plan’ if it

is established and maintained by a church … for its employees and

employees of one or more agencies of such church.” Id. § 1002(33)(C)

(ADD1) (emphasis added). But Congress included a sunset clause; that


7

provision “shall not apply … for any plan year beginning after

December 31, 1982.” Id.

Church groups had two primary concerns about this 1974

definition: (1) that the sunset provision would preclude church plans

from covering employees of church agencies after 1982; and (2) that the

requirement that all church plans be “established and maintained” by a

church would exclude certain non-hierarchical, congregational

denominations that used distinct financial services organizations (often

called “pension boards”) to maintain their pension plans. To address

these concerns, Senator Talmadge and Representative Conable co-

sponsored amendments to the church plan definition, which were

enacted as part of the Multiemployer Pension Plan Amendments Act of

1980, Pub. L. No. 96-364 (1980). This language adopted in 1980

remains current law. ADD2-3 (current version of statutory text).

With respect to the first concern (regarding employees of church

agencies), Talmadge recognized that “Church agencies are essential to

the churches’ mission” and that church plans “have historically covered

both ministers and lay employees of churches and church agencies.”

125 Cong. Rec. 10,052 (1979) (ADD13). Talmadge noted that under the


8

1974 definition, “the churches must divide their plans into two so that

one will cover church employees and the other, agency employees.” Id.

Because these agencies were small and financially dependent upon

churches, Talmadge expressed doubt that “the agency plans would

survive subjection to ERISA.” Id. (unlike “a business,” which would

“pass[]” increased plan costs “on to the consumer,” “[t]he incomes of

most church agencies … are dependent solely upon tithes and other

offerings.”). Talmadge also recognized that “[m]inisters and lay

employees have a unique need to be covered by one plan.” Id. Conable

shared these concerns. See, e.g., 124 Cong. Rec. 12,107 (1978) (ADD7).

Accordingly, Talmadge and Conable proposed, and Congress

enacted, a provision stating that an “employee of a church … includes

… an employee of an organization … which is controlled by or

associated with a church.” 29 U.S.C. § 1002(33)(C)(ii)(II) (ADD2).

Congress also provided that “[a] church … shall be deemed the

employer of any individual included as an employee under clause (ii).”

Id. § 1002(33)(C)(iii). The result was that a “church plan”—which is

still defined as “a plan established and maintained … for its employees


9

… by a church,” id. § 1002(33)(A) (emphasis added)—could continue to

include employees of church-associated organizations indefinitely.4

With respect to the second concern of church groups (regarding

congregational denominations that used separate pension boards to

“maintain” their church plans), Talmadge and Conable proposed—and

Congress enacted—language that amended the meaning of “[a] plan

established and maintained … by a church” to include:

a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits … for the employees of a church …, if such organization is controlled by or associated with a church[.]

29 U.S.C. § 1002(33)(C)(i) (ADD2).

Accordingly, a church plan may be “maintained” by either a

church or a church-associated principal-purpose organization, such as a

pension board. See, e.g., 126 Cong. Rec. 23,049 (1980) (definition

“clarified to include plans maintained by a pension board maintained by

4 See, e.g., 124 Cong. Rec. 10,464 (1978) (ADD4) (a church plan could “continue after 1982 to provide benefits for employees of organizations controlled by or associated with the church.”); 124 Cong. Rec. 11,103, 16,518-19 (1978); 125 Cong. Rec. 1,356, 10,042 (1979) (ADD5, ADD9-12).


10

a church”) (ADD20); Stenographic Transcript of Hearings Before the

Comm. on Fin., U.S. S., Exec. Sess., 96th Cong. 40 (June 12, 1980)

(statement of Talmadge) (definition would now “include church plans

which rather than being maintained directly by a church are instead

maintained by a pension board maintained by a church”) (ADD29).

C. Informal Internal Revenue Service Opinions

In 1982, the General Counsel of the Internal Revenue Service

(“IRS”) issued a memorandum in response to two orders of religious

sisters, which had submitted an ex parte request that benefit plans for

their hospital employees be recognized as church plans for tax purposes.

IRS Gen. Couns. Mem. 39,007, 1983 WL 197946 (Nov. 2, 1982). Those

plans were not maintained by any church and the IRS recognized that

the plans would not qualify as church plans if they were maintained by

the orders themselves. Id. at *5. However, citing the new language in

subparagraph 33(C)(i) regarding plans “maintained” by principal-

purpose organizations, the memorandum took the position that the

plans could qualify as church plans for tax purposes if they were merely

administered by a three-person administrative committee. Id. There

was no public notice or opportunity for affected employees to comment,


11

and the memorandum itself instructed: “This document is not to be

relied upon or otherwise cited as precedent by taxpayers.” Id. at *6.

Beginning in the late 1980s, benefits consultants realized the

possibilities of this IRS position for larger religiously affiliated hospital

systems and encouraged them to set up internal committees to

administer their plans. As these hospital systems sought their own

“private letter rulings,” the IRS never re-examined its view; it merely

applied the same conclusions adopted by its general counsel in 1982.

See, e.g., IRS Priv. Ltr. Rul. 83-15-054, 1983 WL 198031 (Jan. 13, 1983).

Before 2011—when the IRS first required advance notice to employees,

see Rev. Proc. 2011-44, 2011 WL 4389043 (Sept. 22, 2011)—these

hospital systems typically informed employees of the loss of ERISA

protections years after the fact, if at all.5

The explosion of unregulated and uninsured “church plans”

predictably led to plan failures of the sort ERISA was designed to

prevent. In two 2012 cases that resulted in litigation, complaints

5 See, e.g., Ellen E. Schultz, IRS Nears Action on Church Pensions, Wall St. J. (June 5, 2010), https://goo.gl/6Obu5e.


12

alleged that employees suffered pension losses of 40-50%.6 Participants

of other underfunded plans operated as church plans have faced

significant reductions to accrued benefits.7

D. The Supreme Court’s Advocate Decision

The Supreme Court recently addressed a threshold question

regarding the church plan definition. Employees of three non-profit

hospital systems argued that although the 1980 amendments altered

which employees could be covered by a church plan and which entities

could maintain a church plan, Congress did not eliminate the basic

requirement that a church plan be “established” by a church. This

Court agreed. See Stapleton v. Advocate Health Care Network, 817 F.3d

517 (7th Cir. 2016).

The Supreme Court granted certiorari and reversed, concluding

that “[u]nder the best reading of the statute, a plan maintained by a

principal-purpose organization … qualifies as a ‘church plan,’ regardless

6 See Owens v. St. Anthony Med. Ctr., No. 14-4068 (N.D. Ill.); Butler v. Holy Cross Hosp., No. 16-5907 (N.D. Ill.).

7 See Karin Price Mueller, Bamboozled: How Catholic Hospitals Get Away with Letting Pensions Go Broke, NJ.com (Nov. 28, 2016), https://goo.gl/7TGIkA; Claire Hughes, Retirees of Former Schenectady Hospital Face Pension Loss, Times Union (Jan. 29, 2017), https://goo.gl/QwjVMf.


13

of who established it.” Advocate Health Care Network v. Stapleton, 137

S. Ct. 1652, 1663 (2017). The Supreme Court emphasized that the key

to the church plan exemption is not the “one-time, historical event” of

who “establish[ed]” a plan but instead whether a plan is “maintain[ed]”

by a permissible entity, as “it is the entity maintaining the plan that

has the primary ongoing responsibility (and potential liability) to plan

participants.” Id. at 1661.

Advocate did not consider the alternative reasons why plaintiffs’

plans did not qualify as church plans, including that plans sponsored by

hospital systems are not “maintained” by principal-purpose

organizations. See id. at 1657-58 nn.2-3.8

II. Factual Background

OSF is an Illinois non-profit corporation that operates eleven

acute care hospitals as well as other health care facilities in Illinois and

Michigan. A105, A122 ¶¶ 32, 124; A174, A189 ¶¶ 32, 124; A780, A783.

One facility owned and operated by OSF is St. Anthony’s Health

Center, which is an Illinois nonprofit corporation that merged with OSF

8 Advocate settled after remand, and neither this Court nor the district court in that case resolved the alternative arguments. See Stapleton v. Advocate Health Care Network & Subsidiaries, No. 14-1873 (N.D. Ill.).


14

in 2014 and has since been operated by OSF under the name OSF Saint

Anthony’s Health Center (“SAHC”). A105 ¶ 36; A175 ¶ 36. OSF also

owns a for-profit corporation comprised of healthcare related

businesses. A105 ¶ 32; A174 ¶ 32. As of 2016, OSF had net patient

service revenues of $2.41 billion and assets of $3.49 billion. A100, A105

¶¶ 17, 33; A174 ¶ 33. Like other large non-profit hospital systems, OSF

relies upon revenue bonds to raise money. A106 ¶ 39; A176 ¶ 39; A914-

16.

Although OSF claims an affiliation with the Roman Catholic

Church, OSF is not itself a church and does not claim to be a church in

its Form 990 tax filings with the IRS. A929 (claiming it is “[a] hospital

or a cooperative health service organization”); see also A107 ¶ 45; A177

¶ 45. OSF’s Bylaws explain that the purpose for which OSF was

organized was “to establish, acquire, support, erect, maintain, own, and

equip health care providers and institutions” and to perform certain

ancillary activities. A931. Accord A957 (OSF was founded “for the

purpose of operating hospitals”).

OSF’s 18,000 employees have earned retirement benefits through

the Plans, which are defined benefit pension plans. A100, A105, A108


15

¶¶ 17, 34, 56-59; A171-72, A175, A178-79 ¶¶ 17, 34, 56-59. Plaintiffs

Anton, Bailey, and Wise were employees of OSF and are vested

participants in the OSF Plan. A99-100 ¶¶ 15, 15.1-2; A170-71 ¶¶ 15,

15.1-2. Plaintiffs Smith and Schwierjohn were employed by SAHC and

are vested participants in the SAHC Plan. A98-99, A100 ¶¶ 14, 15.3;

A170, A171 ¶¶ 14, 15.3. OSF admits it is the employer and plan

sponsor with respect to both Plans. A110 ¶¶ 72-74; A180-81 ¶¶ 72-74.

OSF admits that it has the power to continue, amend, or terminate both

Plans. A109 ¶¶ 63, 65-71; A179-80 ¶¶ 63, 65-71.

OSF currently operates the Plans as if they are ERISA-exempt

church plans. A120 ¶ 115; A188 ¶ 115; see also A196-201. But the OSF

Plan was previously operated as an ERISA-covered plan. See A580-87.9

See also A588-91 (1985 statement reflecting OSF payment of PBGC

premiums). In 1989—after receiving an informal, IRS private letter

ruling (“PLR”) opining that the OSF plan was a church plan for tax

purposes, A395-401—OSF sought and received a refund of premiums it

had paid to the PBGC, A415-16; A597-602. In 1992 OSF retroactively

9 OSF previously went by the name Sisters of the Third Order of St. Francis before it changed its name in 1989. See A222-23.


16

amended the Plan to be a “church plan.” A594-96. Similarly, although

the SAHC Plan was operated as an ERISA plan beginning in 1976,

A334, SAHC sought and received a PLR and PBGC refund in 1991, and

thereafter ran the plan as a church plan, A402-14; A417-20; A715.

Despite these changes, OSF continues to sponsor multiple ERISA-

governed plans, including another pension plan. A734; A745-69; A772-

74.

OSF admits it is responsible for funding both Plans. A111 ¶¶ 78-

80; A181-82 ¶¶ 78-80. See also A66, A72; A258, A303-04; A340, A369-

70, A379-80; A913. Yet OSF has left the Plans severely underfunded.

As of 2016, the OSF Plan trust held assets sufficient to fund only 55.9%

of the over $1 billion in accrued benefits. A514. Likewise, as of 2015,

the SAHC Plan trust held assets sufficient to fund only 54% of the over

$70 million in accrued benefits. A528.

The OSF Plan is purportedly administered by the Sisters of the

Third Order of St. Francis Employees Pension Plan Administrative

Committee (“OSF Plan Committee”). A 172 ¶ 18; A304 § 9.02. Yet

meeting minutes reveal this committee met infrequently, for a

combined total of 70 minutes between 2010 and 2017. A612-13; A636-


17

37; A640; A650; A670; A682-83; A702-03; A707-08. Similarly, although

the SAHC Plan is purportedly administered by the SAHC Retirement

Committee (“SAHC Committee”), A 172 ¶ 19; A380-84 § 11.2-9, meeting

minutes show that this committee met only twice since 2010, A728;

A730. (The OSF Plan Committee and SAHC Committee are referred to

collectively as the “Committees.”)

III. Procedural History

Plaintiffs alleged two alternative bases why the Plans are subject

to ERISA. First, they alleged that the Plans do not satisfy the statutory

definition of a church plan because they are not “maintained” by a

permissible entity. A120-22, A129-31. Specifically, because the Plans

are maintained by OSF, a healthcare system, they cannot meet the

statutory requirement that church plans be “maintained” by either a

church or an organization whose “principal purpose or function” is “the

administration or funding” of benefit plans for church employees. See 29

U.S.C. § 1002(33)(A), (C)(i).10 Second, Plaintiffs alternatively alleged

that even if the Plans qualified as “church plans,” application of the

10 Plaintiffs additionally alleged that the Plans failed to satisfy other aspects of the church plan definition. This appeal addresses only the “maintained” requirement.


18

exemption to the Plans would violate the Establishment Clause. A125-

26, A144-48. If Plaintiffs prevail on either theory, they are entitled to

declaratory and other relief requiring the Plans to comply with ERISA.

After Plaintiffs filed suit in April of 2016, see Dist. Ct. Dkt. 1, a

series of disputes ensued regarding venue and the consolidation of

related cases, see A467-71; Dist. Ct. Dkt. 30-37, 40-42, 43-45, 51-55, 62-

66, 69-71, 73-77, 93. Meanwhile, an additional dispute arose regarding

whether this action should be stayed pending a decision in Advocate.

See A473-77; Dist. Ct. Dkt. 86, 87, 89, 96-97, 106, 111. In March of

2017, the district court ruled that written discovery could continue, but

ordered that depositions, as well as all other case deadlines, be held in

abeyance pending an opinion in Advocate. A26; A43-45.

The Supreme Court issued its opinion in Advocate on June 5,

2017, and the district court subsequently granted Plaintiffs leave to file

an amended complaint and ordered the parties to submit a revised

scheduling order. Dist. Ct. Dkt. 116. On August 10, 2017, Magistrate

Judge Daly approved the proposed case schedule submitted by the

parties, which provided that discovery was to be completed by


19

September 6, 2018, and dispositive motions would be due by September

21, 2018. A52-59.

Notwithstanding this agreed-upon schedule, Defendants filed a

motion for summary judgment on December 29, 2017. Dist. Ct. Dkt

147, 148. At the time, depositions had been noticed but not taken, and

the parties were negotiating a number of discovery disputes, including

Defendants’ production of documents and electronically stored

information. See, e.g., A424-29; A482-88.

On January 5, 2018, pursuant to Rule 56(d), Plaintiffs filed a

motion and supporting declaration requesting the district court defer

briefing and consideration of Defendants’ motion for summary judgment

to allow for completion of relevant discovery. Dist. Ct. Dkt. 162. The

district court did not rule on Plaintiffs’ motion to defer prior to the

deadline for Plaintiffs to respond to Defendants’ summary judgment

motion. It also did not rule on the parties’ stipulated request to extend

the summary judgment briefing schedule pending resolution of

Plaintiffs’ motion to defer. See Dist. Ct. Dkt. 164. Accordingly,


20

Plaintiffs opposed Defendants’ summary judgment motion on February

1, 2018.11

The district court granted summary judgment in favor of

Defendants on September 28, 2018. SA1-16. In that order, the district

court denied all other pending motions, including Plaintiffs’ motion to

defer. SA6-7, SA16. The district court held that the Plans were ERISA-

exempt church plans, concluding that there were no genuine disputes of

material fact that the Plans were “maintained” by the Committees and

that the Committees qualified as principal-purpose organizations

within the meaning of 29 U.S.C. § 1002(33)(C)(i). SA10-13. The district

court further held that the church plan exemption did not violate the

Establishment Clause based on the general premise that the

government may accommodate religion. SA15-16.

This appeal followed.

11 Because Plaintiffs’ memorandum contained materials designated “confidential” pursuant to the applicable protective order, Plaintiffs filed a motion to seal, see Dist. Ct. Dkt. 173, and filed and served their sealed memorandum via email on February 1, 2018, pursuant to local practice standards. See Dist. Ct. Dkt. 68 ¶ 10; S.D. Ill. CM/ECF User’s Manual § 2.10. On September 7, 2018, the district court denied the motion to seal, Dist. Ct. Dkt. 190, and Plaintiffs’ unredacted opposition memorandum was filed at Dist. Ct. Dkt. 191.


21

SUMMARY OF ARGUMENT

The district court erred in granting summary judgment to

Defendants. The Plans do not qualify as ERISA-exempt church plans

because they are not “maintained” by either of the two types of entities

that may maintain a church plan: (i) a church, 29 U.S.C. § 1002(33)(A);

or (ii) an organization controlled by or associated with a church whose

“principal purpose or function” is “the administration or funding” of

benefit plans for church employees, id. § 1002(33)(C)(i) (ADD2). The

undisputed facts demonstrate that the Plans are “maintained” by OSF,

a healthcare system with a principal purpose of providing healthcare.

OSF is the employer and “plan sponsor”; it made the commitment to

offer benefits to its employees; it has the authority to amend the Plans;

it determines the nature of, and eligibility for, benefits; and it is

responsible for funding benefits. In other words, OSF is the entity that

“has the primary ongoing responsibility (and potential liability) to plan

participants.” Advocate, 137 S. Ct. at 1661.

The district court’s conclusion that the Plans were instead

“maintained” by the Committees was flawed for multiple reasons. It

ignored the meaning of the term “maintained” as used in the context of


22

ERISA and erroneously conflated maintenance with administration, a

distinct function under ERISA. It failed to evaluate which entity had

the primary ongoing responsibility to Plan participants. And it ignored

genuine factual disputes regarding whether the Committees even

administered the Plans. Yet even if the Committees do maintain the

Plans, the district court also erred because the Committees are mere

subsets or agents of OSF, and thus cannot qualify as autonomous

principal-purpose “organizations” within the meaning of 29 U.S.C. §

1002(33)(C)(i).

The district court relied on the Tenth Circuit’s recent opinion in

Medina v. Catholic Health Initiatives, 877 F.3d 1213 (10th Cir. 2017),

which concluded that a plan covering employees of a church-associated

hospital system was “maintained” by an internal administrative

committee. But the district court ignored—and indeed repeated—

multiple legal errors in Medina: among other things, Medina assumed

its conclusion, failed to apply Advocate’s discussion of the meaning of

“maintained,” and otherwise refused to consider the meaning of terms

within the context of ERISA. Respectfully, Medina is unpersuasive.


23

It is noteworthy that although Advocate did not consider who

maintained the relevant plans or whether internal hospital committees

qualified as principal-purpose organizations, see supra p. 13, Justice

Sotomayor explained in her concurrence that “the provisions governing

which organizations qualify as principal purpose organizations … need

also be construed in line with their text and with a view toward

effecting ERISA’s broad remedial purposes.” 137 S. Ct. at 1663-64

(citation omitted). In a case consolidated with Advocate, the district

court on remand recently held that plaintiffs plausibly alleged that the

pension plan sponsored by Dignity Health was not “properly

maintained as a church plan” because, despite the plan being

administered by an internal committee, plaintiffs plausibly alleged that

the plan was maintained by Dignity, which “is neither a church … nor

an organization whose principal purpose or function is the

administration or funding of the Plan as required by section

1002(33)(C)(i).” Rollins v. Dignity Health, --- F. Supp. 3d. ----, 2018 WL

4262334, at *5 (N.D. Cal. Sept. 6, 2018). See also Stapleton, 817 F.3d at

523 n.5. Rollins further recognized that plaintiffs had “the better


24

argument” that an internal committee of a hospital system could not

qualify as a principal-purpose “organization.” 2018 WL 4262334, at *7.

Reversal is also warranted because the district court abused its

discretion in denying Plaintiffs’ Rule 56(d) motion to defer. When

Defendants filed their motion, Plaintiffs—consistent with the mutually

agreed-upon case schedule—were in the process of seeking documents,

electronic discovery, and deposition testimony regarding, inter alia,

what role the Committees actually played with respect to the

administration or maintenance of the Plans. By unnecessarily denying

Plaintiffs access to discovery that would have permitted them to better

demonstrate the existence of genuine factual disputes, the district court

abused its discretion.

Finally, if the Court reverses with respect to the “church plan”

status of the Plans, principles of constitutional avoidance would

warrant remanding on that question and vacating the district court’s

dismissal of Plaintiffs’ as-applied Establishment Clause claim.

However, if the Court affirms that the Plans satisfy the statutory

church plan definition, then the Court should reverse on the

constitutional question. The district court relied on the general premise


25

that the government may accommodate religion. But it ignored that

unnecessary religious accommodations violate the Establishment

Clause. Where, as here, the government exempts religious entities, but

not secular entities, from a generally applicable statute in the absence

of any government entanglement in religion or substantial burden on

religious exercise, the government lacks a secular purpose and has the

improper effect of endorsing and otherwise advancing religion.

STANDARD OF REVIEW

This Court “review[s] issues of statutory construction de novo.”

United States v. Patel, 778 F.3d 607, 613 (7th Cir. 2015). Similarly, it

“review[s] the district court’s ruling on summary judgment de novo,

construing the record in the light most favorable to the non-movant.”

Oconomowoc Residential Programs v. City of Milwaukee, 300 F.3d 775,

777 (7th Cir. 2002). Summary judgment is proper if the movant shows

“there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

“The district court’s denial of plaintiffs’ Rule 56(d) motion for

additional discovery is reviewed for an abuse of discretion.” Sterk v.

Redbox Automated Retail, LLC, 770 F.3d 618, 622-23 (7th Cir. 2014).


26

ARGUMENT

I. The Plans Are Not Church Plans Because They Are Not Maintained by a Permissible Entity.

A. Only Two Types of Entities May Maintain a Church Plan.

The term “church plan” is defined in 29 U.S.C. § 1002(33). As

originally enacted in 1974, subparagraph 33(A) provided that “[t]he

term ‘church plan’ means a plan established and maintained for its

employees by a church …” (ADD1). Thus, as originally enacted, a

church plan had to be “maintained” by a church.

In 1980 Congress amended the statute to accommodate

congregational denominations that often set up separate “pension

board[s]” to maintain their benefit plans. See supra pp. 7, 9-10 (citing

ADD20, ADD29). Congress retained the original language in

subparagraph 33(A), but added the following new subparagraph

33(C)(i):

A plan established and maintained for its employees … by a church … includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits … for the employees of a church …, if such organization is controlled by or associated with a church[.]


27

29 U.S.C. § 1002(33)(C)(i) (emphasis added) (ADD2).

These provisions remain the same today, and no other provision

addresses who may “maintain” a church plan. Accordingly, only two

types of entities may “maintain” a church plan: (1) churches, pursuant

to subparagraph 33(A); or (2) entities described in subparagraph

33(C)(i), i.e., principal-purpose organizations.

Critically, Congress did not permit all organizations associated

with churches to maintain their own church plans: only pension boards

and similar “organizations” with a “principal purpose or function” of

administering or funding benefit plans for church employees could do

so. Thus, a church-associated hospital or school cannot maintain its

own church plan.

This point is underscored by a different statutory amendment,

also enacted in 1980, that does not contain the principal-purpose

limitation. See generally Loughrin v. United States, 134 S. Ct. 2384,

2390 (2014) (“[W]hen ‘Congress includes particular language in one

section of a statute but omits it in another’—let alone in the very next

provision—this Court ‘presume[s]’ that Congress intended a difference

in meaning.” (citation omitted)). Specifically, in 1980 Congress allowed


28

church plans to provide benefits to employees of any “organization …

controlled by or associated with a church.” Id. § 1002(33)(C)(ii)(II), (iii)

(ADD2). See supra pp. 8-9 (explaining the mechanics of these

subsections). This broader language—not confined by the principal-

purpose limitation—reflected Congress’s intent to permanently extend a

provision, set to expire in 1982, that had permitted a church to include

employees of any associated agency, including hospitals or schools, in its

church plan. See supra pp. 7-9.

When all of the provisions of subparagraph 33(C) are read

together, the following framework is clear: although employees of a

church-associated hospital or school may be covered by a church plan,

that hospital or school cannot itself maintain its own church plan.12

12 That Congress did not envision stand-alone church plans maintained by hospitals is further evidenced by its emphasis on the need for a single plan to cover church and agency employees. See, e.g., Hearings Before the Subcomm. on Private Pension Plans & Emp. Fringe Benefits of the Comm. on Fin., 96th Cong. 365 (Dec. 4-5, 1979) (“one plan for both church and agency employees is critical”) (ADD24); 125 Cong. Rec. 10,052 (“Ministers and lay employees have a unique need to be covered by one plan.”) (ADD13).


29

B. OSF Maintains the Plans.

The Supreme Court explained in Advocate that an entity

maintains a plan if it “has the primary ongoing responsibility (and

potential liability) to plan participants.” 137 S. Ct. at 1661. See also

Rollins, 2018 WL 4262334, at *6. In other words, “maintain” means to

commit to, and have the ultimate responsibility for, providing benefits.

See also Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12 (1987)

(employer did not “maintain” a plan because it did not “assume[] …

responsibility to pay benefits on a regular basis”); cf. Diak v. Dwyer,

Costello & Knox, P.C., 33 F.3d 809, 811 (7th Cir. 1994) (plan

“established or maintained” by employer if there was “‘an expressed

intention by the employer to provide benefits on a regular and long-

term basis’”) (citation omitted).

Here, there is no genuine dispute that OSF made the ongoing

commitment to pay benefits through the Plans and has the primary

ongoing responsibility to Plan participants. Defendants admit that OSF

“offers participation in” the Plans “to eligible employees,” A114 ¶ 97;

A185¶ 97, and that OSF is the employer and “plan sponsor” with

respect to both Plans. A110 ¶¶ 72-74; A180-81¶¶ 72-74. See also 29


30

U.S.C. § 1002(16)(B) (defining “plan sponsor” as the entity that

“established or maintained” the plan) (emphasis added). OSF executed

the operative OSF Plan restatement, which lists OSF as the “Employer”

and “sponsor,” details the benefits to which OSF’s employees are

entitled, and states that OSF “will operate the Plan.” A249-50, A258,

A268-69, A304, A307, A327. See also Anderson v. UNUM Provident

Corp., 369 F.3d 1257, 1267 (11th Cir. 2004) (renewal of obligations to

pay benefits is evidence that employer “maintained” plan).

Likewise, OSF executed an SAHC Plan amendment in 2014

stating that, “[n]otwithstanding any provision in the Plan to the

contrary, the sponsor of the Plan shall be OSF … , which assumes and

herein acknowledges its obligations, responsibilities, and rights as

sponsor of the Plan.” A913; Accord A385 § 12.1 (SAHC Plan

restatement § 12.1). Through this amendment, OSF assumed the

benefit commitments previously enacted by SAHC as the “Sponsoring

Employer,” as detailed in the SAHC Plan restatement. See A334-35,

A340, A353-56, A369-70, A385, A394.

A key element of maintaining a plan is possessing the “power to

modify” or amend its terms, i.e., to determine the nature of the benefit


31

commitment on an ongoing basis. Anderson, 369 F.3d at 1265-67. See

also Golden Gate Rest. Ass’n v. City & Cty. of S.F. (GGRA), 546 F.3d

639, 653-54 (9th Cir. 2008) (holding that city “establishes and

maintains” plan because it made the benefit promise and had control

over whether the plan would continue, the conditions of benefit

eligibility, and the “kind and level” of benefits) (emphasis added). Here,

Defendants admit that OSF has the authority to amend both Plans.

A109 ¶¶ 63, 65-71; A179-80 ¶¶ 63, 65-71. The OSF Plan restatement

states that OSF “shall have the sole responsibility for amending and

terminating this Plan.” A303-04 § 9.01(d). See also A311-12 § 10.01.

The SAHC Plan restatement similarly provides that OSF “shall have

the sole authority … to amend or terminate, in whole or in part this

Plan.” A379-80 § 11.1. See also A371 § 9.1. OSF has in fact amended

both Plans. See, e.g., A913; A915-16; A918-26.

Another key aspect of maintaining a plan is financing or

arranging to finance benefits. See Anderson, 369 F.3d at 1267 (relying

on employer’s “maintenance of a fund to pay benefits”); Fort Halifax,

482 U.S. at 9 (“commitment” to pay benefits entails obligation to

“monitor[] the availability of funds for benefit payments”). Defendants


32

admit that OSF is responsible for funding both Plans. A111 ¶¶ 78-80;

A181-82 ¶¶ 78-80. The OSF Plan restatement provides that OSF “shall

establish a ‘funding policy and method’ … consistent with the objectives

of this Plan,” A303-04, and the Summary Plan Description states that

OSF “is required to contribute” to the OSF Plan, A66, A72. The SAHC

Plan restatement provides that OSF “shall have the sole responsibility

for making contributions necessary to provide benefits under the Plan.”

A379-80.

Logically, maintaining a plan must also entail the authority to

stop offering benefits, i.e., to terminate the plan. See Hightower v. Tex.

Hosp. Ass’n, 65 F.3d 443, 449 (5th Cir. 1995) (foundation’s decision to

terminate rather than continue plan meant that foundation

“maintained” plan). Defendants admit that OSF has the authority to

terminate both Plans. A109 ¶¶ 63, 65-71; A179-80 ¶¶ 63, 65-71. See

also A313-14 § 10.05, A371-72 § 9.2. Any surplus in OSF Plan assets

will revert to OSF upon termination. A312-14 §§ 10.03, 10.05.

That OSF maintains the Plans is further supported by: (i) the OSF

Plan document itself, which reflects that OSF, the “Employer,”

“maintain[s]” the OSF Plan, A258 § 2.21; and (ii) OSF’s request to the


33

IRS for a PLR, in which OSF described the OSF Plan as “maintained”

by OSF. A554. Indeed, although OSF has since pleaded in the

alternative, see A179-80, it previously admitted, without equivocation,

that OSF “maintains” both Plans, A20 ¶¶ 65-66, 70; A29-34¶¶ 65-66,

70, 88, 170.

C. OSF Is Neither a Church nor a Principal-Purpose Organization.

Because the Plans are “maintained” by OSF, they would qualify as

ERISA-exempt church plans only if OSF is a church, see 29 U.S.C. §

1002(33)(A), or a principal-purpose organization, id. § 1002(33)(C)(i)

(ADD2). But there is no genuine dispute that OSF is a healthcare

corporation, not a church. OSF annually reports to the IRS in its Form

990 that it qualifies as a public charity because it is a “hospital” or

“health service organization”; it does not claim to be a “church,” another

option on that form. A929; see also A107 ¶ 45; A177 ¶ 45. OSF’s 1988

letter to the IRS requesting a PLR conceded it “is not in and of itself a

church,” and instead claimed it was merely “associated with” the

Roman Catholic Church. A552. See also A400 (IRS letter ruling stating

that OSF “is not itself a church”); A566-67. Indeed, OSF did not claim

to be a church in moving for summary judgment, Dist. Ct. Dkt. 148, and


34

the arguments Defendants did make—that the Committees maintain

the Plans, id. at 11-14, and that OSF is controlled by or associated with

a church, id. at 14-20—would be wholly unnecessary if OSF were a

church.

There also is no genuine dispute that OSF does not have a

“principal purpose or function” of administering or funding benefit

plans for church employees. OSF’s principal purpose is the provision of

healthcare. Its Bylaws list its “purpose” as the operation of “health care

providers and institutions.” A931. See also A957 (OSF founded “for the

purpose of operating hospitals”). In conjunction with its bond offerings,

OSF describes itself as “an integrated health care delivery system that

operates 11 acute care hospitals in Illinois and Michigan.” A783.

Because OSF maintains the Plans and is neither a church nor a

principal-purpose organization, the Plans are not church plans. 29

U.S.C. § 1002(33)(A), (C)(i). See also Rollins, 2018 WL 4262334, at *5;

Hanshaw v. Life Ins. Co. of N. Am., 2014 WL 5439253, at *8 (W.D. Ky.

Oct. 24, 2014) (hospital that maintained plan did not satisfy

subparagraph 33(C)(i) because its “principal purpose is the provision of

healthcare, not the administration of a benefits plan”).


35

D. The Committees Do Not Maintain the Plans.

The district court entered summary judgment based on its

conclusion that the Plans were “maintained,” not by OSF, but by two

internal OSF Committees that are named as the administrators of the

Plans. SA11-13. But there is no genuine dispute that the Committees

do not: sponsor the Plans; make the commitment to provide benefits to

OSF’s employees; execute the Plan restatements; control Plan

amendments13; fund the promised Plan benefits; or possess authority to

terminate the Plans. See supra pp. 29-33.

The district court’s conclusion that the Committees nonetheless

“maintained” the Plans was based on its (1) misinterpretation of the

meaning of the term “maintained” in the context of ERISA; (2) failure to

13 The SAHC Plan restatement states that the SAHC Plan Committee “shall have no power to add to, subtract from or modify any of the terms of the Plan.” A381-82 § 11.5. Although the OSF Committee “may act on behalf of [OSF] in adopting any amendment” to the OSF Plan, A311 § 10.01(a), this provision makes clear that the OSF Committee is acting as an agent of OSF, and the restatement elsewhere states that OSF has “sole responsibility” for amendments, A304 § 9.01(d). This limited delegation of amendment authority does not mean the administrator “maintains” the OSF Plan. See Sipma v. Mass. Cas. Ins. Co., 256 F.3d 1006, 1013 (10th Cir. 2001) (“that an employer delegates part of the operational responsibility for the plan to the insurer does not mean that it did not ‘establish or maintain’ a plan”) (citation omitted).


36

evaluate which entity had “primary” responsibility; and (3) disregard

for genuine factual disputes regarding whether the Committees actually

exercised their limited authority.

1. The District Court Applied an Erroneous, Acontextual Definition of “Maintained.”

The district court, following the lead of Medina, relied on

dictionary definitions unconnected to ERISA to support its

determination that the “ordinary meaning” of the term “maintain” was

to “care for the plan for purposes of operational productivity.” SA12

(quoting Medina, 877 F.3d at 1225). Accord Sanzone v. Mercy Health,

326 F. Supp. 3d 795, 803 (E.D. Mo. 2018). Like Medina and Sanzone,

the district court then concluded that the Committees satisfied this

definition of “maintained” because they were named as the

administrators of the Plans. SA12-13. In other words, the district

court, Medina, and Sanzone defined “maintained” as synonymous with

“administered.” This was erroneous.

Those opinions relied on the general premise that, in construing a

statute, a court may look to a term’s ordinary meaning if that term was

left undefined by Congress. See Medina, 877 F.3d at 1225 (citations


37

omitted); Sanzone, 326 F. Supp. 3d at 803 (citations omitted). But as

the Supreme Court has explained,

[t]he definition of words in isolation … is not necessarily controlling in statutory construction. … Interpretation of a word or phrase depends upon reading the whole statutory text, considering the purpose and context of the statute, and consulting any precedents or authorities that inform the analysis.

Dolan v. U.S. Postal Serv., 546 U.S. 481, 486 (2006). Accord Hibbs v.

Winn, 542 U.S. 88, 101 (2004) (refusing to define a statutory term “in

isolation” based on an acontextual reliance on a dictionary definition).

ERISA uses the terms “maintain” and “administer” to refer to two

distinct functions. This is clear from how these terms are contrasted

within a single paragraph of ERISA’s definitional provision: paragraph

16 distinguishes between the “plan sponsor,” which is the entity that

“established or maintained” a plan, 29 U.S.C. § 1002(16)(B) (emphasis

added), and the plan “administrator,” which is the entity so designated

by the plan instrument, id. § 1002(16)(A)(i). Although paragraph 16

provides that a sponsor must fill the role of administrator if its plan

fails to designate an administrator, id. § 1002(16)(A)(ii), the sponsor

may designate a different “administrator” without losing its status as


38

the “plan sponsor” that “established or maintained” the plan, id. §

1002(16)(A)(i).

Other provisions confirm that “maintained” refers to the sponsor’s

commitment to provide benefits rather than to plan administration.

ERISA defines both “welfare plan” and “pension plan” by reference to

the entity or entities that “established or maintained” the plans for the

purpose of providing specified benefits. 29 U.S.C. § 1002(1), (2). See

also Rollins, 2018 WL 4262334, at *6 (noting that ERISA’s repeated

pairing of the term “maintained” with the term “established,” including

by referring to the role of the plan sponsor, suggests “a degree of

responsibility not found in the word ‘administer’”) (citations omitted).

Both the statutory text and Supreme Court precedent further

make clear that “administration” refers to the exercise of fiduciary

discretion in applying the terms of a plan, whereas “maintained” refers

to the non-fiduciary decisions of a plan sponsor in making the benefit

commitment and designing the terms of a plan. ERISA expressly lists

plan “administration” as a fiduciary function, 29 U.S.C. §

1002(21)(A)(iii). Maintenance is not listed within ERISA’s three-part

definition of a fiduciary. See id. § 1002(21)(A).


39

Consistent with these provisions, the Supreme Court has

repeatedly recognized that “plan sponsors” (i.e., the entities that

“established or maintained” plans) are “generally free … to adopt,

modify, or terminate” benefit plans, and when they “undertake those

actions, they do not act as fiduciaries, but are analogous to the settlors

of a trust.” Lockheed Corp., 517 U.S. at 890 (citations omitted). In

doing so, the Supreme Court expressly separated these so-called

“settlor” functions of a plan sponsor from fiduciary actions, including

plan “administration.” See, e.g., id.; Hughes Aircraft Co. v. Jacobson,

525 U.S. 432, 443-44 (1999); Varity Corp. v. Howe, 516 U.S. 489, 529

(1996) (“[T]he decision to modify or terminate welfare benefits … are

not governed by ERISA’s fiduciary obligations because they do not

involve discretionary administration of the plan.”).

As noted above, courts interpret “maintained” consistent with the

role of the plan sponsor in designing and offering benefits. See supra

pp. 29-33 (citing Advocate, 137 S. Ct. at 1661; Fort Halifax, 482 U.S. at

12; Anderson, 369 F.3d at 1267; GGRA, 546 F.3d at 653-54; Hightower,

65 F.3d at 449). And courts treat administration and maintenance as

distinct concepts. See, e.g., Hightower, 65 F.3d at 446, 449 (foundation


40

“maintained” plan even though distinct entity was plan administrator);

Rollins, 2018 WL 4262334, at *6; Stalp v. Excellus Health Plan, Inc.,

2012 WL 3637257, at *1-2 (D. Neb. Aug. 22, 2012) (plan administered

by insurance company was “maintained” by employer that paid

premiums); In re Consol. Litig. Concerning Int’l Harvester’s Disposition

of Wis. Steel, 681 F. Supp. 512, 518 (N.D. Ill. 1988) (“maintaining a plan

is not defined[,]” but “choice of words suggests someone with more

responsibility” than to “simply administer[]”).

Accordingly, by treating administration and maintenance

synonymously, the district court gave the term “maintained” a different

meaning under the church plan definition than it has elsewhere in

ERISA. Contra Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469,

479 (1992) (“[I]dentical terms within an Act bear the same meaning.”).

Nothing in the specific language of subparagraph 33(C)(i) suggests that

Congress intended that result. Indeed, the language confirms that

“maintained” and “administration” are distinct terms.

Subparagraph 33(C)(i) can be divided into two distinct parts. The

first part (“A plan established and maintained … by a church …

includes a plan maintained by an organization”) describes a condition


41

for a plan to qualify as a church plan: i.e., if it is “maintained” by an

“organization.” The second part (“the principal purpose or function of

which is the administration or funding of a plan”) restricts the scope of

organizations that, pursuant to the first part, can maintain a church

plan. As the Supreme Court explained, “everything after the word

‘organization’ in [subparagraph 33(C)(i)] is just a (long-winded)

description of a particular kind of church-associated entity—which this

opinion will call a ‘principal-purpose organization.’” Advocate, 137 S. Ct.

at 1656. Accordingly, although an organization can qualify as a

“principal-purpose organization” if its principal purpose is plan

“administration,” a plan will not qualify as a church plan unless it is

“maintained” by a principal-purpose organization.

As Rollins recently recognized, “[i]f Congress had not intended to

attach any significance to the word ‘maintained,’ it could have simply

required that a plan be ‘administered or funded’ by a principal-purpose

organization, and not also ‘maintained’ by one.” 2018 WL 4262334, at *6

(citing Advocate, 137 S. Ct. at 1659 (“when legislators did not adopt

obvious alternative language, the natural implication is that they did

not intend the alternative”)). Construing subparagraph 33(C)(i) as


42

merely requiring a principal-purpose organization to “administer or

fund” the plan “simply reads the word ‘maintained’ out entirely,” in

violation of “another well-settled principled of statutory construction:

‘that legislative enactments should not be construed to render their

provisions ‘mere surplusage.’” Id. (citation omitted)).

Because both the general ERISA context and the specific text of

the church plan definition compel the conclusion that “maintained”

means something more than administration, the district court’s reliance

on dictionary definitions—and its resulting conflation of maintenance

and administration—was in error. See also Rollins, 2018 WL 4262334,

at *7 (criticizing Medina for not addressing “the word ‘maintain’ in the

context of the remainder of” ERISA’s definitional provisions).14

Finally, the district court’s passing suggestion that it did not

equate “maintain” and “administer,” SA12 n.3, is unpersuasive. The

14 The Tenth Circuit also assumed its conclusion. Medina initially formulated the “maintained” question as follows: “is the entity’s retirement plan maintained by a principal-purpose organization?” 877 F.3d at 1222 (emphasis added). See also SA8. Implicit in this formulation (“the entity’s retirement plan”) is the erroneous assumption that the “entity” that sponsors or provides a benefit plan may be distinct from the entity that “maintain[s]” the plan. But see supra pp. 37-40.


43

sole reason the district court concluded that the Committees “care[] for

the [Plans] for purposes of operational productivity” is because of their

authority as plan administrators: i.e., their authority to interpret the

Plan language, make eligibility and benefit determinations, and make

certain rules concerning plan administration. SA12-13. These are well

recognized functions of plan administrators. See, e.g., Varity Corp., 516

U.S. at 530 (“the discretionary interpretation of a plan term, or the

discretionary determination that the plan does not authorize a certain

type of procedure, would likely qualify as plan administration by a

fiduciary”); Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115

(1989) (according deference to plan administrators who have been

granted “discretionary authority” “to determine eligibility for benefits or

to construe the terms of the plan”).15

15 Although the OSF Plan restatement states that the plan “shall be administered and maintained by” the OSF Committee, SA4 (citing A304 § 9.02), the authority designated to the committee relates only to plan administration, A304-06 § 9.02, 9.04, the committee acts “on behalf” of OSF, A264 § 2.40, and the restatement elsewhere states that OSF “maintains” the plan, see supra pp. 32-33.


44

2. The District Court Failed to Evaluate Which Entity Had the “Primary” Responsibility.

Even if plan administration duties were examples of plan

maintenance, the district court further erred by failing to evaluate

which entity, as between the Committees and OSF, had the “primary

ongoing responsibility.” Advocate, 137 S. Ct. at 1661 (emphasis added).

Remarkably, Medina and Sanzone entirely ignored this standard. See

Medina, 877 F.3d at 1224-27; Sanzone, 326 F. Supp. 3d at 802-05. The

district court recited it, SA13, but did not meaningfully evaluate which

entity had primary responsibility. Instead, it summarily concluded that

the Committees qualified because the Plans “entrust” them with plan

administration responsibilities (including benefit determinations and

plan interpretation). The district court did not evaluate those

responsibilities in comparison to the authority and liability retained by

OSF, including that OSF made the commitment to provide benefits and

is responsible for funding those benefits.

The district court also failed to address the fact that the

Committees acted as agents of OSF. The OSF Committee is

“designated” plan administrator by OSF and acts “on behalf of” OSF.

A264 § 2.40. See also A304 § 9.01(c) (OSF “shall periodically review the


45

performance of” the OSF Committee). Likewise, the members and

chairperson of the SAHC Committee are appointed by, and “shall serve

at the pleasure of” OSF’s Board. A380 § 11.2. The district court did not

consider how Committees acting “on behalf of” or “at the pleasure of”

OSF could be considered to have primary responsibility.

The district court relatedly failed to address how the Committees

could have primary responsibility if they were merely interpreting and

carrying out Plan terms designed, executed, and/or adopted by OSF.

The OSF Plan restatement states that the OSF Committee’s

administration authority is “subject to the specific terms of the Plan”; it

must “administer the Plan in accordance with its terms” and interpret

the Plan “in light of … evidence of the intent of the Employer [i.e. OSF]

in establishing and modifying the Plan ….” A304-06 § 9.04, 9.06

(emphasis added). Similarly, the SAHC Plan restatement provides that

the SAHC Committee “shall administer the Plan in accordance with its

terms” and makes clear that it “shall have no power to add to, subtract

from or modify” any Plan term, “to change or add to any benefits,” or “to

waive or fail to apply any requirements of eligibility for benefits …

without the express consent of” the OSF Board. A380-82 § 11.2, 11.5.


46

Ultimately, the discretion to interpret and determine eligibility

under Plan terms adopted by OSF does not surpass OSF’s primary

responsibility as the entity that makes the benefits commitment,

determines the nature of benefits, sets the criteria for benefit eligibility,

and funds those benefits. Although the district court additionally noted

that a participant may file suit against a plan administrator for a

“wrongful denial of benefits,” SA13, a participant may also file suit

against OSF for violations of its commitments, including for failure to

fund Plan benefits. See A148-59; 29 U.S.C. § 1132(a)(3). At the very

least, there exist genuine disputes of material fact regarding which

entity has “primary ongoing responsibility (and potential liability) to

plan participants.” Advocate, 137 S. Ct. at 1661.

3. The District Court Ignored Genuine Factual Disputes Regarding Who Administers the Plans.

Even if administration alone could constitute plan maintenance,

the district court failed to evaluate whether the Committees actually

administered the Plans. The district court relied exclusively on the

delegation of authority to administer the Plans. See SA12-13. But

genuine disputes exist regarding whether the Committees performed

the administrative tasks on which the district court relied. The


47

meetings minutes of these Committees reveal that they almost never

convened for meetings. The OSF Committee met for a total of only

seventy (70) minutes over the eight-year period between 2010 and 2017;

it met twice in 2010, 2014, and 2015, and once in 2013 and 2016. A612-

13; A636-37; A640; A650; A670; A682-83; A702-03; A707-08. The SAHC

Committee met only twice since 2010, for a total of two hours, A728;

A730. See also A426 (addressing RFP No. 2); A462 (admitting that no

other minutes existed).

The district court disposed of this argument in a footnote,

asserting that “the question is not whether the Plan Committees are

doing their jobs well or excessively delegating their authority, but

rather whether the structure satisfies the requirement of the church

plan definition.” SA13 n.4. But the “requirement of the church plan

definition” is not merely that a principal-purpose organization possess

the authority to maintain a plan; the plan must actually be

“maintained” by the principal-purpose organization. 29 U.S.C. §

1002(33)(C)(i). Indeed, even the district court’s own definition of

“maintained” requires more than the possession of authority: it looks to

which entity actually “cares for the plan for purposes of operational


48

productivity.” SA12. There are obvious, genuine factual disputes as to

whether Committees that met so infrequently (in some years, not at all)

were “car[ing] for” the “operational productivity” of the Plans.

E. Even If the Committees “Maintained” the Plans, They Are Not Principal-Purpose “Organization[s].”

Subparagraph 33(C)(i) requires that the principal-purpose entity

that maintains a plan be an “organization.” 29 U.S.C. § 1002(33)(C)(i)

(ADD2). The Committees are not. Defendants conceded that the

Committees are “internal OSF benefit committees” whose members are

appointed by OSF’s Board. Dist. Ct. Dkt. 148 at p. 11. The OSF Plan

Committee is “designated” plan administrator by OSF and acts “on

behalf of” OSF. A264 § 2.40; see also A304 § 9.02. The members and

chairperson of the SAHC Plan Committee are appointed by, and “shall

serve at the pleasure of,” the OSF Board. A380 § 11.2. If a vote of the

OSF Plan Committee is tied, “the decision of [OSF] shall control.” A304

§ 9.02. Members of both Committees are indemnified by OSF. A306 §

9.07; A389 § 13.11.

The membership of the two Committees is identical, A226 ¶ 27,

and these same individuals also sit on other “committees” performing

other OSF business during omnibus meetings. See generally A606;


49

A610; A644; A965-66. Defendants also admit that the Committees do

not have charters. A462.

Because the Committees are merely non-juridical subsets of OSF

conducting business on OSF’s behalf, there is at least a genuine dispute

as to whether the Committees are “organizations” distinct from OSF—

whose principal purpose is not plan administration or funding.

Notably, the Supreme Court expressly declined to consider whether

“hospitals’ internal benefits committees” qualify as principal-purpose

organizations. Advocate, 137 S. Ct. at 1658 n.3.

The district court relied on statutory language stating that a

principal-purpose “organization” may be a “civil law corporation or

otherwise,” 29 U.S.C. § 1002(33)(C)(i) (emphasis added), and concluded

that this “suggests that principal purpose organizations need not be a

[sic] separate, legally independent entity.” SA11. But that language

means only that a principal-purpose organization need not be

incorporated—a partnership, LLC, or unincorporated association may

qualify if it meets the other statutory criteria. That language does not

eliminate the basic requirement that the entity be an “organization.”


50

See Rollins, 2018 WL 4262334, at *7 (“‘Or otherwise’ cannot simply

encompass any possible entity[.]”).

The district court noted that the statute does not define

“organization,” SA11, and, following the lead of Medina and Sanzone,

relied on dictionary definitions to conclude that an internal committee

of another entity could qualify. Id. But that again ignored statutory

context. Contra Hibbs, 542 U.S. at 101. Congress distinguished

between church-associated, principal-purpose organizations (which may

maintain church plans) and other church-associated organizations

(which may not maintain church plans but whose employees may

participate in a church plan). See supra pp. 26-28.

To permit any church-associated entity to maintain its own

ERISA-exempt church plan by creating an internal committee to serve

as a principal-purpose “organization” would eviscerate the distinction

Congress made between subparagraph 33(C)(i) and subparagraphs

33(C)(ii)(II) and (iii). Contra Loughrin, 134 S. Ct. at 2390. It would also

render superfluous the principal-purpose clause of subparagraph

33(C)(i). Contra Bennett v. Spear, 520 U.S. 154, 173 (1997). And it

would be an odd way to express a simple idea: that church plans can be


51

maintained by any organization controlled by or associated with a

church. Contra Whitman v. Am. Trucking Ass’n, 531 U.S. 457, 468

(2001) (Congress does not “hide elephants in mouseholes.”).16

Medina noted that under plaintiffs’ view, “virtually no plan

administered by a benefits committee or similar organization could

qualify for the church-plan exemption.” 877 F.3d at 1226. But this

assumes the conclusion. Nothing in the statutory text or legislative

history indicates that Congress intended internal benefits committees of

otherwise disqualified hospitals to maintain church plans. And in any

event, Medina’s premise is flawed: if a church used an internal

committee to administer its own plan, the plan would still be

“maintained” by the church pursuant to subparagraph 33(A). As the

legislative history makes clear, subparagraph 33(C)(i) was intended to

address the situation in which churches and religious denominations

used separate organizations, such as denominational pension boards, to

16 See also S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.A.N. at 4854 (ERISA coverage should be construed “liberally” to provide “maximum” protections for workers, and “exemptions should be confined to their narrow purpose.”); John Hancock Mut. Life Ins. Co. v. Harris Tr. & Sav. Bank, 510 U.S. 86, 97 (1993) (the court is “inclined, generally, to tight reading of exemptions from comprehensive schemes of this kind”).


52

maintain their church plans. See supra pp. 7, 9-10. That practice is

fully consistent with Plaintiffs’ interpretation.

Finally, although the district court cited Thorkelson v. Publishing

House of Evangelical Lutheran Church in America, 764 F. Supp. 2d

1119, 1127 (D. Minn. 2011), that opinion merely paraphrased

subparagraph 33(C)(i) before concluding, without analysis, that it was

“clear” that the plan was a church plan because it was “administered”

by a committee. Id.

F. The Informal Position of the IRS and Department of Labor Is Neither Controlling nor Persuasive.

Defendants also relied on informal IRS and Department of Labor

(“DOL”) opinion letters that had adopted Defendants’ interpretation of

subparagraph 33(C)(i). See Dist. Ct. Dkt. 148 at p. 13. But as this

Court previously recognized, see Stapleton, 817 F.3d at 530, the

statutory interpretation reflected in these opinion letters is not entitled

to deference because it was not arrived at through “a formal

adjudication or notice-and-comment rulemaking,” Christensen v. Harris

Cty., 529 U.S. 576, 587 (2000), and was not intended to be binding on

third parties, United States v. Mead Corp., 533 U.S. 218, 233 (2001).

Indeed, the law is clear that “[n]either the courts nor the IRS may rely


53

on letter rulings as precedent.” Bankers Life & Cas. Co. v. United

States, 142 F.3d 973, 978 (7th Cir. 1998); see also 26 U.S.C. § 6110(k)(3)

(“a written determination may not be used or cited as precedent”);

ERISA Proc. 76-1, § 10, 41 Fed. Reg. 36,281 (Aug. 27, 1976) (“Only the

parties described in the request for opinion may rely on the opinion[.]”).

The IRS and DOL opinions are also not entitled to any “respect”

because they lack any “power to persuade.” See Christensen, 529 U.S.

at 587 (citing Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)).

Among the factors that give an interpretation the “power to persuade”

are the “thoroughness evident in its consideration” and the “validity of

its reasoning.” Skidmore, 323 U.S. at 140. The IRS’s initial 1982

General Counsel Memorandum, as well as the subsequent PLRs on

which Defendants rely, are entirely devoid of reasoning: they assume,

without explanation, that “maintained” means “administered” and that

an internal committee can qualify as an “organization.”17 The DOL

opinion letter Defendants cited merely paraphrased the statute before

17 See IRS Gen. Couns. Mem. 39,007, 1983 WL 197946 (Nov. 2, 1982); IRS Priv. Ltr. Rul. 83-15-054, 1983 WL 198031 (Jan. 13, 1983); IRS Priv. Ltr. Rul. 86-12-068, 1985 WL 297663 (Dec. 26, 1985); IRS Priv. Ltr. Rul. 2014-21-031, 2014 WL 2136100 (May 23, 2014). See also A395-401; A402-14.


54

concluding that a plan “maintained and operated under the authority of

a [p]lan [c]ommittee” qualified. DOL Op. Ltr. 86-19A, 1986 WL 38856,

at *1 (Aug. 22, 1986).

It is noteworthy that although Advocate recognized that the IRS

“believe[s]” that an “internal benefits committee of a church-affiliated

non-profit” qualifies as a principal-purpose organization, 137 S. Ct. at

1657, it did not adopt this interpretation, id. at n.2, 1658 n.3, and with

respect to the “established” issue, it engaged in its own de novo

interpretation without reliance on the IRS or DOL. Id. at 1658-63.

Defendants also cannot rely on decades-old PLRs that specifically

addressed the Plans. See A395-402; A402-14. A taxpayer may rely on a

PLR only vis-à-vis the IRS and only with respect to the tax status of a

plan. See Rev. Proc. 2018-1, § 2.01, 2018 WL 253644 (Jan. 2, 2018) (a

“letter ruling” is a response to a taxpayer’s inquiry “about its status for

tax purposes or the tax effects of its acts or transactions”); see also id. §

11.03. No authority provides that an IRS PLR regarding a plan’s tax

status may be used as a defense to claims by plan participants to

enforce ERISA.

* * *


55

Because the district court erred as a matter of law and because

there exist genuine disputes of material fact regarding whether the

Plans are maintained by a principal-purpose organization, the Court

should reverse the district court’s grant of summary judgment.

II. The District Court Abused Its Discretion by Denying Plaintiffs’ Rule 56(d) Request.

As Plaintiffs’ counsel explained in a Rule 56(d) declaration,

additional discovery was essential to certain arguments Plaintiffs would

have made in opposition to Defendants’ motion, including those related

to which entity maintains the Plans. A422 A426; A433-35. See also

A483-84. For example, Plaintiffs had sought additional discovery to

confirm what the meeting minutes seem to suggest: that the

Committees did not actually administer—much less maintain—the

Plans and did not operate autonomously from OSF. See supra pp. 44-

52. Specifically, Plaintiffs sought, but had not yet received, materials

prepared for and presented to the Committees. See A435 (addressing

RFP No. 2). They sought, but had not yet received, electronic discovery

on a variety of topics, including the maintenance and administration of

the Plans. See, e.g., A425-27, A430; A435-38; A479, A480, A482-84;

A486-88. Plaintiffs sought, but were denied, the opportunity to conduct


56

depositions of the members of the Committees and OSF human

resources personnel. See A430; A439-54 (notices of depositions); A488

¶¶ 105-06.

The district court did not dispute that additional discovery was

“pertinent” to the issues addressed in its order. See SA6-7. Instead, it

observed that Rule 56(d) “does not require” a court to allow time for

discovery, and concluded that although Defendants filed their motion

“well before the extended discovery deadline, Plaintiffs had ample time

and opportunity to conduct discovery.” Id.

But the district court ignored that discovery was slow to

commence because of disputes over venue and consolidation, as well as

because of the Supreme Court’s pending decision on the then-threshold

“established” issue. See supra pp. 18-19. Depositions were held in

abeyance pending a decision in Advocate. A43-45. Because affirmance

by the Supreme Court would have obviated the need to engage in

discovery regarding the alternative reasons why ERISA applies, the

parties agreed—pending a decision in Advocate—to refrain from

conducting electronic discovery, issuing additional requests, and

producing documents responsive to certain existing requests. A48 n.1.


57

On August 10, 2017, following the Advocate decision and an additional

three-week stay of discovery, Dist. Ct. Dkt. 116, the district court

approved the proposed case schedule agreed to by all parties, which

provided that discovery was to be completed by September 6, 2018, and

dispositive motions would be due by September 21, 2018. A52-59.

The district court improperly rewarded Defendants for agreeing to

this one-year discovery schedule and then unilaterally truncating it by

moving for summary judgment on December 29, 2017—before they had

produced relevant materials solely within their possession and provided

testimony that would have allowed Plaintiffs to offer a more complete

opposition to their motion. See, e.g., Easley v. Kirmsee, 382 F.3d 693,

699 (7th Cir. 2004) (citing cases in which district courts improperly

granted summary judgment while “litigants were awaiting responses to

outstanding discovery requests from reluctant defendants who were

withholding facts necessary for the litigants to oppose summary

judgment”).

III. Application of the Church Plan Exemption Is Unconstitutional.

Plaintiffs alleged, in the alternative, that even if the Plans satisfy

the “church plan” definition, they still are not exempt from ERISA


58

because applying the church plan exemption to religiously affiliated

hospital systems like OSF would violate the Establishment Clause.

A125-26; A144-48. The district court granted summary judgement to

Defendants on this claim. SA14-16.

If this Court reverses the district court’s holding that the church

plan exemption applies, there would be no need to evaluate whether

application of the exemption violates the Constitution. In that case,

principles of constitutional avoidance would compel vacatur of the

district court’s ruling on Plaintiffs’ Establishment Clause claim. See,

e.g., White v. Regester, 422 U.S. 935, 935-36 (1975) (“Rather than render

an unnecessary judgment on the validity of the constitutional views

expressed by the District Court[,] … we vacate the judgment of the

District Court and remand” for consideration of other, non-

constitutional issues); cf. Evans v. City of Chicago, 689 F.2d 1286, 1299

(7th Cir. 1982) (vacating portion of order that unnecessarily resolved

constitutional question).

However, if the Court affirms that the Plans qualify as church

plans, it should reverse the district court’s Establishment Clause

holding. “[A] governmental practice violates the Establishment Clause


59

if it (1) lacks a legitimate secular purpose; (2) has the primary effect of

advancing or inhibiting religion; or (3) fosters an excessive

entanglement with religion.” Doe ex rel. Doe v. Elmbrook Sch. Dist.

(Elmbrook), 687 F.3d 840, 849 (7th Cir. 2012) (citing Lemon v.

Kurtzman, 403 U.S. 602, 612-13 (1971)). In applying Lemon’s “primary

effect” prong, this Court considers inter alia whether the government

practice has the “effect of communicating a message of government

endorsement … of religion.” Id. (quoting Lynch v. Donnelly, 465 U.S.

668, 692 (1984) (O’Connor, J., concurring)).18 Application of the church

plan exemption to religiously affiliated hospital systems like OSF

serves no secular purpose and has the primary effect of endorsing and

otherwise advancing religion.

A. Religious “Accommodations” Must Eliminate Government Entanglement in Religion or Relieve a Substantial Religious Burden.

Congress may not favor “religious adherents collectively over

nonadherents.” Bd. of Educ. v. Grumet, 512 U.S. 687, 696 (1994).

18 See also Freedom From Religion Found., Inc. v. Concord Cmty. Sch., 885 F.3d 1038, 1045-46 & n.1 (7th Cir. 2018) (continuing to apply endorsement test notwithstanding “debate among the Justices” about its “continuing validity.”).


60

Accord Elmbrook, 687 F.3d at 850 (“[T]he touchstone for Establishment

Clause challenges remains ‘the principle that the First Amendment

mandates government neutrality … between religion and nonreligion.’”)

(quoting McCreary Cty. v. ACLU of Ky., 545 U.S. 844, 860 (2005).

Exempting religious hospital systems, but not secular hospital systems,

from PBGC insurance, minimum funding requirements, and other

ERISA requirements violates this principle of neutrality, as it favors

religious entities collectively over secular entities.

The district court—and the Tenth Circuit in Medina—relied on a

limited exception to this neutrality principle: the government may

“‘accommodate religious practices.’” Cutter v. Wilkinson, 544 U.S. 709,

713 (2005) (citation omitted). See SA15 (citing Corp. of Presiding

Bishop of Church of Jesus Christ of Latter-Day Saints v. Amos, 483 U.S.

327, 335 (1987)); Medina, 877 F.3d at 1231-33. But the government

may “accommodate” religious entities by exempting them from a

generally applicable law only if that law (i) creates excessive

government entanglement in religion, Amos, 483 U.S. at 335; or (ii)

imposes substantial burdens on religious exercise, see Cutter, 544 U.S.

at 720.


61

For example, Amos addressed the exemption of religious entities

from Title VII’s prohibition of religious discrimination in employment.

By preserving the ability of religious entities to hire and fire employees

who share or violate their religious beliefs, the exemption “alleviate[d]

significant governmental interference with the ability of religious

organizations to define and carry out their religious missions.” 483 U.S.

at 335 (emphasis added). See also Digrugilliers v. Consol. City of

Indianapolis, 506 F.3d 612, 617 (7th Cir. 2007) (discussing Amos).

Similarly, in Cutter, the Supreme Court held that the Religious Land

Use and Institutionalized Persons Act (“RLUIPA”), which provides an

exemption from governmental actions that impose “substantial

burdens” on the religious exercise of institutionalized persons, did not

violate the Establishment Clause “because it alleviates exceptional

government-created burdens on private religious exercise.” Cutter, 544

U.S. at 720.19

19 See also Charles v. Verhagen, 348 F.3d 601, 611 (7th Cir. 2003) (“RLUIPA seeks to remove only the most substantial burdens States impose upon prisoners’ religious rights”). Courts have reached the same conclusion with respect to the “nearly identical” provisions of the Religious Freedom Restoration Act (“RFRA”). Id. at 610-11.


62

Critically, Amos and Cutter do not permit unnecessary religious

accommodations. Indeed, both cases made clear that “[a]t some point,

accommodation may devolve into ‘an unlawful fostering of religion.’”

Cutter, 544 U.S. at 714 (quoting Amos, 483 U.S. at 334-35).

Thus, an exemption exclusive to religious entities from a generally

applicable law that imposes no substantial religious burden and causes

no religious entanglement would serve no purpose and would have no

effect other than to improperly favor religious adherents over

nonadherents. See Texas Monthly, Inc. v. Bullock, 489 U.S. 1, 15 (1989);

cf. Wallace v. Jaffree, 472 U.S. 38, 59 & n.48 (1985) (explaining that “no

purpose is not a secular purpose,” and concluding that a law favoring

religious exercise in the absence of any need to accommodate religious

exercise violated the Establishment Clause because it could support

“only two conclusions”: “(1) the statute was enacted to convey a message

of state endorsement and promotion of [religion]; or (2) the statute was

enacted for no purpose”).

Texas Monthly held that an exemption from a generally applicable

sales tax violated the Establishment Clause because it was available

exclusively to religious, but not secular, publications. 489 U.S. at 15.


63

In that case, the state “adduced no evidence that the payment of a sales

tax by subscribers to religious periodicals or purchasers of religious

books would offend their religious beliefs or inhibit religious activity.”

Id. at 18. Thus, because the “government direct[ed] a subsidy

exclusively to religious organizations that … cannot reasonably be seen

as removing a significant state-imposed deterrent to the free exercise of

religion … , it ‘provide[d] unjustifiable awards of assistance to religious

organizations’ and cannot but ‘conve[y] a message of endorsement’ to

slighted members of the community.” Id. at 15.20 See also Digrugilliers,

506 F.3d at 616-17 (Establishment Clause may be violated by

“protective” zoning laws that “give churches privileges that similarly

situated secular users … do not enjoy,” since it could not be argued that,

absent protective zones, “the church’s effective operation as a religious

institution” would be “gravely” impaired).

20 See also Tex. Monthly, 489 U.S. at 28 (Blackmun, J., concurring) (tax exemption available “exclusively to the sale of religious publications” constituted “preferential support” of religion).


64

B. Application of the Church Plan Exemption Does Not Eliminate Government Entanglement in Religion or Alleviate a Substantial Religious Burden.

1. ERISA Does Not Burden or Cause Entanglement in Religion.

ERISA is indistinguishable from an array of neutral laws that do

not burden religious exercise when applied to commercial activities.

See, e.g., Jimmy Swaggart Ministries v. Bd. of Equalization, 493 U.S.

378, 391-94 (1990) (distinguishing between religious burdens and

general “administrative and recordkeeping burdens,” noting that even

“substantial administrative burdens … do not rise to a constitutionally

significant level,” and applying generally applicable tax to sale of

religious materials). Although ERISA imposes disclosure and

recordkeeping requirements, see Medina, 877 F.3d at 1233, record

keeping and inspection provisions that “apply only to commercial

activities undertaken with a ‘business purpose,’ ... have no impact on …

evangelical activities.” Tony & Susan Alamo Found. v. Sec’y of Labor,

471 U.S. 290, 305 (1985) (applying Fair Labor Standards Act to

religiously affiliated commercial activities). And the Supreme Court

has rejected arguments that religious exercise is burdened simply


65

because a neutral, generally applicable law decreases funds available

for religious purposes. Jimmy Swaggart, 493 U.S. at 390-91.

Although Medina asserted that ERISA limits the use of socially

responsible investment policies, 877 F.3d at 1233; accord Dist. Ct. Dkt.

148 at p. 23 n.19, the DOL has made clear that ERISA does not prohibit

screening morally objectionable investments as long as alternative

investments are reasonably expected to perform on par with screened

investments. 29 C.F.R. § 2509.2015-01 (2015); see also DOL Field

Assistance Bulletin No. 2018-01 (Apr. 23, 2018).21 It is implausible that

OSF would be unable to locate investment alternatives that perform at

least as well as the stock of individual companies that manufacture

abortifacients, alcohol, tobacco, or defense weapons. See A237 (OSF

Socially Responsible Guidelines). OSF offered no evidence suggesting

otherwise. Moreover, because the DOL standard is compelled by the

duty to act solely in the interest of the plan’s participants, 29 C.F.R.

§ 2509.2015-01—a standard also required by Illinois law and the Plan

documents, see, e.g., In re Estate of Muppavarapu, 836 N.E.2d 74, 77

21 Available at https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2018-01.


66

(Ill. App. Ct. 2005); A304-06 § 9.04; A379-80 § 11.1—ERISA imposes no

additional burden on OSF.

OSF has effectively conceded that ERISA compliance does not

impose substantial burdens on its religious exercise, as OSF chooses to

comply with ERISA with respect to its other benefit plans, A772-74,

including several retirement plans. Id. See also A734; A745-69. Thus,

as Judge Kanne explained in his concurring opinion in Stapleton, “this

is not one of those cases,” like the contraceptive mandate challenged in

Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), in which a

statute “compel[s] entities to provide services that violate their religious

beliefs.” 817 F.3d at 532 (Kanne, J., concurring).

2. Application of the Exemption Does Not Comport with Congress’s Stated Purpose.

The district court cited Medina’s discussion of Congress’s stated

purpose in enacting the church plan exemption. See SA15 (citing

Medina, 877 F.3d at 1231). Congress enacted the exemption to avoid

“examinations of books and records” that “might be regarded as an

unjustified invasion of the confidential relationship … with regard to

churches and their religious activities,” S. Rep. No. 93-383, 1974


67

U.S.C.C.A.N. at 4965 (emphasis added).22 But the relevant question in

this as-applied challenge is whether application of the exemption

comports with Congress’s stated purpose. See Bowen v. Kendrick,

487 U.S. 589, 602, 621 (1988) (remanding for evaluation of whether

application demonstrated impermissible purpose); McCreary, 545 U.S.

at 862 (“‘implementation of the statute’” can reveal impermissible

purpose) (citation omitted).

Application of the exemption here does not comport with

Congress’s stated purpose of avoiding governmental evaluations of

“books and records” regarding “churches and their religious activities.”

OSF is not a church, and no church established, maintained,

administers, or participates in the Plans. OSF is a multi-billion-dollar

hospital system that competes in a heavily regulated healthcare

22 Medina cited statements from Conable and Talmadge related to the 1980 amendments, 877 F.3d 1230-31, but Conable and Talmadge made clear that their amendments were intended to further Congress’ original purpose. See 124 Cong. Rec. 12,106 (“In 1974, when we enacted [ERISA], we exempted church plans … to avoid excessive Government entanglement[.]”) (ADD6); 125 Cong. Rec. 10,052 (expressing concern about “Government entanglement” “[i]f we have enacted a statute that may require the church plans to … file reports, be subject to the examination of books and records and possible foreclosure of church property to satisfy plan liabilities[.]”) (emphasis added) (ADD13).


68

marketplace, see A793, 795-802, and already voluntarily discloses its

financial records and relationships in detail, A178 ¶ 54 (admitting that

OSF “complies with all federal and state regulations and reporting

requirements” and “at all times shares its consolidated financial

statements and other financial information to rating agencies and the

public in connection with, among other things, the issuance of tax-

exempt revenue bonds.”); A779-94, A838-911, see also A885-94

(disclosing information regarding the Pans). See generally Santa Fe

Indep. Sch. Dist. v. Doe, 530 U.S. 290, 309 (2000) (policy “not necessary

to further any of [the stated secular] purposes”).

Yet even if Congress’s stated purpose—regardless of its

applicability to OSF—was sufficient to satisfy Lemon’s purpose prong, it

is irrelevant to whether application of the exemption has a permissible

effect. See, e.g., Milwaukee Deputy Sheriffs’ Ass’n v. Clarke, 588 F.3d

523, 528 (7th Cir. 2009) (Lemon’s effect prong “requires no inquiry into

the government’s intent”); Elmbrook, 687 F.3d at 853 n.16. Because

OSF is not a church and already discloses its financial records in great

detail, an exemption from ERISA’s reporting requirements would not

alleviate government entanglement in church books and records; its


69

primary—indeed, only—effect would be to advance religious adherents

over non-adherents.

3. The District Court Mistakenly Relied on Amos and Other Valid Religious Accommodations.

The district court next emphasized that Lemon’s effects test

requires that “the government itself has advanced religion through its

own activities and influence.” SA15 (citing Amos, 483 U.S. at 337).

Amos explained that when the government accommodates religious

exercise by alleviating a religious burden, the government is merely

allowing other entities to freely exercise religion. 483 U.S. at 337.23 But

the Supreme Court has made clear that the government itself advances

or endorses religion if it exempts religious, but not secular, entities from

a generally applicable statute absent a need to alleviate religious

entanglement or burden. See Tex. Monthly, 489 U.S. at 15; Comm. for

Pub. Educ. & Religious Liberty v. Nyquist, 413 U.S. 756, 793 (1973) (tax

exemptions for parents of children in sectarian schools “cannot be

23 Amos also cited the tax exemption upheld in Walz v. Tax Commission, 397 U.S. 664 (1970), which unlike the church plan exemption, was available to religious and secular entities. Id. at 673. Amos explained that a generally available tax exemption merely “allows churches to advance religion.” 483 U.S. at 337.


70

squared with the principle of neutrality[;] … their purpose and

inevitable effect are to aid and advance those religious institutions”).

The district court also stated there “is no principled distinction

between” the church plan exemption and other statutory exemptions,

such as a provision in the Americans with Disabilities Act permitting

religious entities to consider religion in employment decisions. See

SA15 (citing, e.g., 42 U.S.C. § 12113(d)). See also Medina, 877 F.3d at

1232 (citing religious accommodations). But neither the district court

nor Medina addressed the distinction at the heart of this case: that

unlike valid religious accommodations, see supra pp. 59-63, an ERISA

exemption for religiously affiliated hospital systems is unnecessary. See

generally Mercier v. Fraternal Order of Eagles, 395 F.3d 693, 702 (7th

Cir. 2005) (“The Supreme Court, and this court, have emphasized the

case-by-case nature of a court’s review of an alleged Establishment

Clause violation.”) (citations omitted). Because application of ERISA to

religiously affiliated hospital systems like OSF would not entangle the

government in religion or impose substantial religious burdens, an

exemption for these hospital systems would have no effect other than to

favor religious hospital systems over secular ones.


71

C. A Religious Accommodation Must Be Measured to Avoid Burdening Nonbeneficiaries.

Even if the application of the church plan exemption could be

viewed as a religious accommodation, it still would impermissibly

advance religion because it is imposed at the expense of

nonbeneficiaries. “[A]n accommodation must be measured so that it

does not override other significant interests.” Cutter, 544 U.S. at 722.

Specifically, “courts must take adequate account of the burdens a

requested accommodation may impose on nonbeneficiaries.” Id. at 720

(citing Estate of Thornton v. Caldor, Inc., 472 U.S. 703, 710 (1985)). See

also Tex. Monthly, 489 U.S. at 15 (religious tax exemption that “burdens

nonbeneficiaries markedly” violates Establishment Clause).

In Caldor, the Supreme Court held that a statute that provided

employees an unqualified right to time off on their chosen Sabbath day

violated the Establishment Clause because it “would require the

imposition of significant burdens on other employees required to work

in place of the Sabbath observers.” 472 U.S. at 710. Here, the burdens

of the church plan exemption are imposed primarily upon OSF’s

employees, who receive no benefit from the exemption and instead are

denied all ERISA protections, including minimum funding protections


72

and PBGC insurance of their benefits. See also United States v. Lee,

455 U.S. 252, 261 (1982) (“[A]n exemption from social security taxes

[for] an employer … impose[s] the employer’s religious faith on the

employees.”). Application of the exemption also impermissibly burdens

OSF’s secular competitors, who must make ERISA contributions and

pay PBGC insurance premiums.

It simply cannot be said that the church plan exemption, as

applied in this context, is “measured” to avoid “overrid[ing] other

significant interests.” Cutter, 544 U.S. at 722. Indeed, the exemption is

not “measured” at all. Although Congress was concerned with

government evaluations of church records, see supra pp. 66-68, it did

not enact a narrow exemption from reporting or recordkeeping

requirements; it enacted a blanket exemption from all of ERISA,

including minimum funding and PBGC insurance requirements.24

24 Notably, if any aspect of ERISA substantially burdens a hospital’s religious exercise, Congress has provided a much narrower means of relief: that entity may seek relief under RFRA. See generally Hobby Lobby, 134 S. Ct. at 2760-75. RFRA would provide a narrow exemption from the particular provision that burdened religion; the hospital would not receive complete immunity from the entirety of ERISA. See Cutter, 544 U.S. at 720 (noting that under RLUIPA, which is analogous to RFRA, “courts must take adequate account of the burdens a requested accommodation may impose on nonbeneficiaries”).


73

Because application of the exemption “unyielding[ly] weigh[s]” the

religious interests of OSF “over all other interests,” including the

interests of its employees, application of the exemption “has a primary

effect that impermissibly advances” religion. Caldor, 472 U.S. at 710.

CONCLUSION

This Court should reverse the district court’s grant of summary

judgment on the question of whether the Plans qualify as ERISA-

exempt church plans and vacate its decision regarding the

Establishment Clause. However, if this Court affirms that the Plans

qualify as church plans, it should reverse the district court’s grant of

summary judgment with respect to the Establishment Clause.

RESPECTFULLY SUBMITTED this 10th day of December.

KELLER ROHRBACK L.L.P.

By: s/ Matthew M. GerendMatthew Gerend (Lead Attorney) Lynn L. Sarko Laura R. Gerber 1201 Third Ave., Suite 3200 Seattle, WA 98101 Tel.: (206) 623-1900

COHEN MILSTEIN SELLERS &TOLL PLLC Karen L. Handorf Michelle C. Yau Mary Bortscheller Scott M. Lempert 1100 New York Ave., N.W. Suite 500, West Tower Washington, D.C. 20005 Tel.: (202) 408-4600

KELLER ROHRBACK L.L.P.Ron Kilgard 3101 N. Central Ave., Suite 1400 Phoenix, AZ 85012 Tel.: (602) 248-0088

IZARD, KINDALL & RAABE, LLPMark P. Kindall 29 South Main Street, Suite 305 West Hartford, CT 06107 Tel.: (860) 493-6292


74

KESSLER TOPAZ MELTZER &CHECK, LLP Mark K. Gyandoh 280 King of Prussia Road Radnor, PA 19087 Tel.: (610) 667-7706

Attorneys for Plaintiffs-Appellants


75

CERTIFICATE OF COMPLIANCE

I, Matthew M. Gerend, certify that:

1. This brief complies with the type-volume limitation of

Circuit Rule 32(c) because it contains 13,990 words, excluding the parts

of the brief exempted by Fed. R. App. P. 32(f); and

2. This brief complies with the typeface requirements of Rule

32(a)(5) and the type style requirements of Rule 32(a)(6) because it has

been prepared in a proportionally spaced typeface using Microsoft Office

Word 2016 in 14-point Century Schoolbook font.

Dated this 10th day of December, 2018.

By /s/ Matthew M. Gerend

Keller Rohrback L.L.P. 1201 Third Ave., Suite 3200 Seattle, WA 98101 Tel.: (206) 623-1900


76

CERTIFICATE OF SERVICE

I hereby certify that on December 10, 2018, I electronically filed

the foregoing with the Clerk of the Court for the United States Court of

Appeals for the Seventh Circuit by using the CM/ECF system. I certify

that counsel for all the parties to this appeal are registered CM/ECF

users and that service will be accomplished by the CM/ECF system.

/s/ Matthew M. Gerend


no. 18-3325 - keller rohrback llp · no. 18-3325 united states court of appeals for the seventh...

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